UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

  

 

 

FORM 10-Q

 

 

 

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2015

 

OR

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 001-13901

 

 

 

AMERIS BANCORP

(Exact name of registrant as specified in its charter)

 

 

 

GEORGIA 58-1456434
(State of incorporation) (IRS Employer ID No.)

 

310 FIRST STREET, S.E., MOULTRIE, GA 31768

(Address of principal executive offices)

 

(229) 890-1111

(Registrant’s telephone number)

  

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ¨

 

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No   ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act. (Check one):

 

Large accelerated filer ¨ Accelerated filer x
       
Non-accelerated filer ¨  (Do not check if a smaller reporting company) Smaller reporting company ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act).    Yes  ¨    No  x

 

There were 32,196,117 shares of Common Stock outstanding as of October 30, 2015.

 

 

 

 

 

AMERIS BANCORP

TABLE OF CONTENTS

 

    Page
     
PART I – FINANCIAL INFORMATION  
     
Item 1. Financial Statements.
     
  Consolidated Balance Sheets at September 30, 2015, December 31, 2014 and September 30, 2014 1
     
  Consolidated Statements of Earnings and Comprehensive Income/(Loss) for the Three and Nine Month Periods Ended September 30, 2015 and 2014 2
     
  Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2015 and 2014 3
     
  Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014 4
     
  Notes to Consolidated Financial Statements 5
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 55
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 83
     
Item 4. Controls and Procedures. 83
     
PART II – OTHER INFORMATION  
     
Item 1. Legal Proceedings. 84
     
Item 1A. Risk Factors. 84
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 84
     
Item 3. Defaults Upon Senior Securities. 84
     
Item 4. Mine Safety Disclosures. 84
     
Item 5. Other Information. 84
     
Item 6. Exhibits. 84
     
Signatures 84

 

 

 

 

Item 1. Financial Statements.

 

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

 

  

September 30,
2015

  

December 31,
2014

  

September 30,
2014

  

(Unaudited)

  

(Audited)

  

(Unaudited)

 
Assets               
Cash and due from banks  $114,396   $78,036   $69,421 
Federal funds sold and interest-bearing accounts   120,925    92,323    40,165 
Investment securities available for sale, at fair value   811,385    541,805    529,509 
Other investments   9,322    10,275    12,687 
Mortgage loans held for sale, at fair value   111,807    94,759    110,059 
                
Loans, net of unearned income   2,290,649    1,889,881    1,848,759 
Purchased loans not covered by FDIC loss share agreements (“purchased non-covered loans”)   767,494    674,239    673,724 
Purchased loan pools not covered by FDIC loss share agreements (“purchased loan pools”)   410,072    -    - 
Purchased loans covered by FDIC loss share agreements (“covered loans”)   191,021    271,279    313,589 
Less: allowance for loan losses   (22,471)   (21,157)   (22,212)
Loans, net   3,636,765    2,814,242    2,813,860 
                
Other real estate owned, net   20,730    33,160    35,320 
Purchased, non-covered other real estate owned, net   11,538    15,585    13,660 
Covered other real estate owned, net   12,203    19,907    28,883 
Total other real estate owned, net   44,471    68,652    77,863 
Premises and equipment, net   124,756    97,251    98,752 
FDIC loss-share receivable, net   4,506    31,351    38,233 
Other intangible assets, net   18,218    8,221    9,114 
Goodwill   87,701    63,547    58,879 
Cash value of bank owned life insurance   59,894    58,867    58,217 
Other assets   72,154    77,748    82,649 
Total assets  $5,216,300   $4,037,077   $3,999,408 
                
Liabilities and Stockholders’ Equity               
Liabilities               
Deposits:               
Noninterest-bearing  $1,275,800   $839,377   $816,517 
Interest-bearing   3,254,723    2,591,772    2,556,602 
                
Total deposits   4,530,523    3,431,149    3,373,119 
Securities sold under agreements to repurchase   51,506    73,310    32,351 
Other borrowings   39,000    78,881    147,409 
Other liabilities   23,371    22,384    27,615 
Subordinated deferrable interest debentures   69,600    65,325    65,084 
Total liabilities   4,714,000    3,671,049    3,645,578 
                
Stockholders’ Equity               
Preferred stock, stated value $1,000; 5,000,000 shares authorized; 0 shares issued and outstanding   -    -    - 
Common stock, par value $1; 100,000,000 shares authorized; 33,609,894; 28,159,027 and 28,157,898 issued   33,610    28,159    28,158 
Capital surplus   336,599    225,015    224,142 
Retained earnings   140,282    118,412    109,170 
Accumulated other comprehensive income   4,197    6,098    3,974 
Treasury stock, at cost, 1,413,777; 1,385,164 and 1,383,496 shares   (12,388)   (11,656)   (11,614)
Total stockholders’ equity   502,300    366,028    353,830 
Total liabilities and stockholders’ equity  $5,216,300   $4,037,077   $3,999,408 

 

See notes to unaudited consolidated financial statements.

 

 1 

 

  

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME/(LOSS)

(dollars in thousands, except per share data)

(Unaudited)

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
  

2015

  

2014

 

2015

 

2014

Interest income                    
Interest and fees on loans  $45,775   $39,610   $124,231   $109,376 
Interest on taxable securities   4,694    3,034    11,594    8,972 
Interest on nontaxable securities   480    496    1,411    1,143 
Interest on deposits in other banks and federal funds sold   246    46    556    175 
Total interest income   51,195    43,186    137,792    119,666 
Interest expense                    
Interest on deposits   2,521    2,540    7,065    6,928 
Interest on other borrowings   1,275    1,514    3,808    3,858 
Total interest expense   3,796    4,054    10,873    10,786 
Net interest income   47,399    39,132    126,919    108,880 
Provision for loan losses   986    1,669    4,711    4,760 
Net interest income after provision for loan losses   46,413    37,463    122,208    104,120 
Noninterest income                    
Service charges on deposit accounts   10,766    6,659    24,346    18,092 
Mortgage banking activity   10,404    7,498    28,214    19,510 
Other service charges, commissions and fees   1,145    690    2,642    2,004 
Gain on sale of securities   115    132    137    138 
Other noninterest income   2,548    2,922    7,840    6,730 
Total noninterest income   24,978    17,901    63,179    46,474 
Noninterest expense                    
Salaries and employee benefits   24,934    20,226    68,031    54,562 
Occupancy and equipment   5,915    4,669    15,278    12,804 
Advertising and marketing expenses   667    594    2,141    2,022 
Amortization of intangible assets   1,321    698    2,581    1,668 
Data processing and communications costs   5,329    3,928    13,803    11,322 
Credit resolution-related expenses   1,083    3,186    15,484    8,216 
Merger and conversion charges   446    551    6,173    3,873 
Other noninterest expenses   8,701    4,727    22,596    14,669 
Total noninterest expense   48,396    38,579    146,087    109,136 
Income before income tax expense   22,995    16,785    39,300    41,458 
Income tax expense   7,368    5,122    12,601    13,315 
Net income   15,627    11,663    26,699    28,143 
Less preferred stock dividends and discount accretion   -    -    -    286 
Net income available to common shareholders  $15,627   $11,663   $26,699   $27,857 
Other comprehensive income (loss)                    
Unrealized holding gains (losses) arising during period on investment securities available for sale, net of tax of ($936), $114, $615 and ($2,610)   1,739    (211)   (1,143)   4,847 
Reclassification adjustment for gains included in earnings, net of tax of $40, $46, $48 and $48   (75)   (86)   (89)   (90)
Unrealized gains (losses) on cash flow hedges arising during period, net of tax of $290, ($80), $360 and $264   (539)   149    (669)   (489)
Other comprehensive income (loss)   1,125    (148)   (1,901)   4,268 
Total comprehensive income (loss)  $16,752   $11,515   $24,798   $32,411 
Basic earnings per common share  $0.49   $0.44   $0.84   $1.08 
Diluted earnings per common share  $0.48   $0.43   $0.84   $1.07 
Dividends declared per common share  $0.05   $0.05   $0.15   $0.10 
Weighted average common shares outstanding                    
Basic   32,195    26,773    31,614    25,705 
Diluted   32,553    27,161    31,962    26,099 

  

See notes to unaudited consolidated financial statements.

 

 2 

 

  

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(dollars in thousands, except per share data)

(Unaudited)

 

  

Nine Months Ended

  

Nine Months Ended

  

September 30, 2015

  

September 30, 2014

 
  

Shares

  

Amount

  

Shares

 

Amount

PREFERRED STOCK                    
Balance at beginning of period   -   $-    28,000   $28,000 
Repurchase of preferred stock   -    -    (28,000)   (28,000)
                     
Issued at end of period   -   $-    -   $- 
                     
COMMON STOCK                    
Balance at beginning of period   28,159,027   $28,159    26,461,769   $26,462 
Issuance of common stock   5,320,000    5,320    1,598,998    1,599 
Proceeds from exercise of stock options   59,867    60    29,084    29 
Issuance of restricted shares   71,000    71    68,047    68 
                     
Issued at end of period   33,609,894   $33,610    28,157,898   $28,158 
                     
CAPITAL SURPLUS                    
Balance at beginning of period       $225,015        $189,722 
Stock-based compensation        1,140         1,230 
Issuance of common shares, net of issuance costs of $4,811 and $0        109,569         32,875 
Proceeds from exercise of stock options        946         383 
Issuance of restricted shares        (71)        (68)
                     
Balance at end of period       $336,599        $224,142 
                     
RETAINED EARNINGS                    
Balance at beginning of period       $118,412        $83,991 
Net income        26,699         28,143 
Dividends on preferred shares        -         (286)
Dividends on common shares        (4,829)        (2,678)
                     
Balance at end of period       $140,282        $109,170 
ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAX                    
Unrealized gains on securities and derivatives:                    
Balance at beginning of period       $6,098        $(294)
Other comprehensive income (loss) during the period        (1,901)        4,268 
                     
Balance at end of period       $4,197        $3,974 
                     
TREASURY STOCK                    
Balance at beginning of period   (1,385,164)  $(11,656)   (1,363,342)  $(11,182)
Purchase of treasury shares   (28,613)   (732)   (20,154)   (432)
                     
Balance at end of period   (1,413,777)  $(12,388)   (1,383,496)  $(11,614)
TOTAL STOCKHOLDERS’ EQUITY       $502,300        $353,830 

  

See notes to unaudited consolidated financial statements.

 

 3 

 

  

AMERIS BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

 

  

Nine Months Ended
September 30,

 
  

2015

  

2014

 
Cash flows from operating activities:          
Net income  $26,699   $28,143 
Adjustments reconciling net income to net cash used in operating activities:          
Depreciation   6,504    5,850 
Amortization of intangible assets   2,581    1,668 
Net amortization of investment securities available for sale   4,397    2,609 
Net gains on securities available for sale   (137)   (138)
Stock based compensation expense   1,140    1,230 
Net (gains) losses on sale or disposal of premises and equipment   83    (615)
Net write-downs and losses on sale of other real estate owned   12,193    2,344 
Provision for loan losses   4,711    4,760 
Accretion of discount on covered loans   (8,105)   (20,822)
Accretion of discount on purchased non-covered loans   (8,055)   (5,840)
Changes in FDIC loss-share receivable, net of cash payments received   7,756    8,699 
Increase in cash surrender value of BOLI   (1,027)   (973)
Originations of mortgage loans held for sale   (784,548)   (504,164)
Proceeds from sales of mortgage loans held for sale   748,509    468,671 
Net gains on sale of mortgage loans held for sale   (30,427)   (19,501)
Originations of SBA loans   (41,116)   (43,771)
Proceeds from sales of SBA loans   29,381    23,366 
Net gains on sale of SBA loans   (3,158)   (2,351)
Change attributable to other operating activities   14,630    3,685 
Net cash used in operating activities   (17,989)   (47,150)
           
Cash flows from investing activities, net of effect of business combinations:          
Net decrease in federal funds sold and interest-bearing deposits   77,586    180,742 
Purchase of securities available for sale   (246,090)   (102,340)
Proceeds from maturities of securities available for sale   64,390    37,706 
Proceeds from sales of securities available for sale   69,208    92,975 
Decrease in restricted equity securities, net   1,825    5,116 
Net increase in loans, excluding purchased non-covered and covered loans   (349,541)   (201,552)
Purchases of loan pools   (422,956)   - 
Payments received on purchased non-covered loans   123,311    58,350 
Payments received on purchased loan pools   12,884    - 
Payments received on covered loans   60,930    85,946 
Purchases of premises and equipment   (11,057)   (3,779)
Proceeds from sales of premises and equipment   282    1,213 
Proceeds from sales of other real estate owned   33,460    31,913 
Payments received from FDIC under loss-share agreements   19,089    18,509 
Net cash proceeds received from acquisitions   567,652    1,099 
Net cash provided by investing activities
   973    205,898 
           
Cash flows from financing activities, net of effect of business combinations:          
Net increase in deposits   46,315    4,864 
Net decrease in securities sold under agreements to repurchase   (63,392)   (56,593)
Proceeds from other borrowings   -    117,463 
Repayment of other borrowings   (39,881)   (187,032)
Redemption of preferred stock   -    (28,000)
Dividends paid - preferred stock   -    (286)
Dividends paid - common stock   (4,829)   (2,678)
Purchase of treasury shares   (732)   (432)
Issuance of common stock   114,889    - 
Proceeds from exercise of stock options   1,006    412 
Net cash provided by (used in) financing activities   53,376    (152,282)
Net increase in cash and due from banks   36,360    6,466 
Cash and due from banks at beginning of period   78,036    62,955 
Cash and due from banks at end of period  $114,396   $69,421 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION          
Cash paid/(received) during the period for:          
Interest  $11,106   $10,773 
Income taxes  $2,739   $15,008 
Loans (excluding purchased non-covered and covered loans) transferred to other real estate owned  $9,838   $9,268 
Purchased non-covered loans transferred to other real estate owned  $2,565   $1,955 
Covered loans transferred to other real estate owned  $6,909   $10,840 
Loans provided for the sales of other real estate owned  $4,996   $987 
Change in unrealized gain on securities available for sale, net of tax  $(1,143)  $4,847 
Change in unrealized loss on cash flow hedge (interest rate swap), net of tax  $(669)  $(489)
Issuance of common stock in acquisitions  $-   $34,474 

 

See notes to unaudited consolidated financial statements.

 

 4 

 

  

AMERIS BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

(Unaudited)

 

NOTE 1 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES

 

Ameris Bancorp (the “Company” or “Ameris”) is a financial holding company headquartered in Moultrie, Georgia. Ameris conducts substantially all of its operations through its wholly owned banking subsidiary, Ameris Bank (the “Bank”). At September 30, 2015 the Bank operated 103 branches in select markets in Georgia, Alabama, Florida and South Carolina. Our business model capitalizes on the efficiencies of a large financial services company while still providing the community with the personalized banking service expected by our customers. We manage our Bank through a balance of decentralized management responsibilities and efficient centralized operating systems, products and loan underwriting standards. The Company’s Board of Directors and senior managers establish corporate policy, strategy and administrative policies. Within our established guidelines and policies, the banker closest to the customer responds to the differing needs and demands of his or her unique market.

 

The accompanying unaudited consolidated financial statements for Ameris have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. The interim consolidated financial statements included herein are unaudited but reflect all adjustments (consisting of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the period ended September 30, 2015 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto and the report of our registered independent public accounting firm included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

 

Newly Issued Accounting Pronouncements

 

ASU 2015-16 – Business Combinations (Topic 805) - Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). ASU 2015-16 requires that an acquirer recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the estimated amounts, calculated as if the accounting had been completed at the acquisition date. The standard also require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the estimated amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for public business entities for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. The Company is currently evaluating the provisions of this amendment to determine the potential impact the new standard will have on the Company's consolidated financial statements.

 

ASU 2015-03 – Interest – Imputation of Interest (“ASU 2015-03”). ASU 2015-03 simplifies presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. ASU 2015-03 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. It should be applied on a retrospective basis. The Company is currently evaluating the impact this standard will have on the Company’s financial position or disclosures.

 

ASU 2015-02 – Consolidation (Topic 810) - Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 includes amendments that are intended to improve targeted areas of consolidation for legal entities including reducing the number of consolidation models from four to two and simplifying the FASB Accounting Standards Codification. ASU 2015-02 is effective for annual and interim periods within those annual periods, beginning after December 15, 2015. The amendments may be applied retrospectively in previously issued financial statements for one or more years with a cumulative effect adjustment to retained earnings as of the beginning of the first year restated. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position or disclosures.

 

ASU 2015-01 – Income Statement – Extraordinary and Unusual Items (“ASU 2015-01”). ASU 2015-01 eliminates the concept of extraordinary items by no longer allowing companies to segregate an extraordinary item from the results of operations, separately present an extraordinary item on the income statement, or disclose income taxes or earnings-per-share data applicable to an extraordinary item. ASU 2015-01 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. The adoption of this standard is not expected to have a material effect on the Company’s results of operations, financial position or disclosures.

 

 5 

 

 

ASU 2014-11 – Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures (“ASU 2014-11”). ASU 2014-11 impacted FASB ASC 860 Transfers and Servicing by changing the accounting for repurchase-to-maturity transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting for other repurchase agreements. The amendments also require new disclosures. An entity is required to disclose information on transfers accounted for as sales in transactions that are economically similar to repurchase agreements. An entity must also provide additional information about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. An entity is required to present changes in accounting for transactions outstanding on the effective date as a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The amendments in this update became effective for interim and annual periods beginning after December 15, 2014 and did not have a material impact on the consolidated financial statements although the required disclosures have been included in Note 8.

 

ASU 2014-09 – Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective prospectively, for annual and interim periods, beginning after December 15, 2017. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position or disclosures.

 

NOTE 2 – PENDING MERGER

 

On September 30, 2015, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Jacksonville Bancorp, Inc., a Florida corporation (“Jacksonville Bancorp”). The Jacksonville Bank is a wholly owned banking subsidiary of Jacksonville Bancorp that has eight full-service branches located in Jacksonville and Jacksonville Beach, Duval County, Florida, as well as one virtual branch. Under the terms of the Merger Agreement, Jacksonville Bancorp shareholders will receive either 0.5861 shares of Ameris common stock or $16.50 in cash for each share of Jacksonville Bancorp common stock or nonvoting common stock they hold, subject to the total consideration being allocated 75% stock and 25% cash. As of June 30, 2015, Jacksonville Bancorp reported assets of $501.9 million, gross loans of $385.7 million and deposits of $426.2 million. The purchase price will be allocated among the net assets of Jacksonville Bancorp acquired as appropriate, with the remaining balance being reported as goodwill. The Merger Agreement has been unanimously approved by the board of directors of each company. The transaction is expected to close in the first quarter of 2016 and is subject to customary closing conditions, regulatory approvals and the approval of Jacksonville Bancorp’s shareholders.

 

NOTE 3– BUSINESS COMBINATIONS

 

Branch Acquisition

 

On June 12, 2015, the Company completed its acquisition of 18 branches from Bank of America, National Association located in Calhoun, Columbia, Dixie, Hamilton, Suwanee and Walton Counties, Florida and Ben Hill, Colquitt, Dougherty, Laurens, Liberty, Thomas, Tift and Ware Counties, Georgia. Under the terms of the Purchase and Assumption Agreement dated January 28, 2015, the Company paid a deposit premium of $20.0 million, equal to 3.00% of the average daily deposits for the 15 calendar day period immediately prior to the acquisition date. In addition, the Company acquired approximately $4.4 million in loans and $11.4 million in premises and equipment.

 

The acquisition of the 18 branches was accounted for using the purchase method of accounting in accordance with FASB ASC 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available. Management continues to evaluate fair value adjustments related to premises and core deposit intangible assets acquired. 

 

 6 

 

 

The following table presents the assets acquired and liabilities assumed as of June 12, 2015 and their fair value estimates. The fair value adjustments shown in the following table continue to be evaluated by management and may be subject to further adjustment:

 

(Dollars in Thousands)  As Recorded by
Bank of America
   Initial Fair
Value

Adjustments
   Subsequent
Fair Value
Adjustments
   As Recorded
by Ameris
 
Assets                    
Cash and cash equivalents  $630,220   $-   $-   $630,220 
Loans   4,363    -    -    4,363 
Premises and equipment   10,348    1,060(a)   (755)(d)   10,917 
Intangible assets   -    7,651(b)   985(e)   8,636 
Other assets   126         264(f)   126 
Total assets  $645,057   $8,711   $494   $654,262 
Liabilities                    
Deposits:                    
Noninterest-bearing  $149,854   $-   $-   $149,854 
Interest-bearing   495,110    (215)(c)   -    494,895 
Total deposits   644,964    (215)   -    644,749 
Other liabilities   93    -    -    93 
Total liabilities   645,057    (215)   -    644,842 
Net identifiable assets acquired over (under) liabilities assumed   -    8,926    494    9,420 
Goodwill   -    11,076    (494)   10,582 
Net assets acquired over (under) liabilities assumed  $-   $20,002   $-   $20,002 
Consideration:                    
Cash paid as deposit premium  $20,002                
Fair value of total consideration transferred  $20,002                

 

 

 

Explanation of fair value adjustments

 

(a)Adjustment reflects the fair value adjustments of the premise and equipment as of the acquisition date.

 

(b)Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.

 

(c)Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired deposits.

 

(d)Adjustment reflects additional recording of fair value adjustment of the premise and equipment.

 

(e)Adjustment reflects additional recording of core deposit intangible on the acquired core deposit accounts.

 

(f)Adjustment reflects recording of deferred tax asset.

 

Goodwill of $10.6 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the branch acquisition and is the result of expected operational synergies and other factors.

 

In the acquisition, the Company purchased $4.4 million of loans at fair value. Management did not identify any loans that were considered to be credit impaired and are accounted for under ASC Topic 310-30.

 

 7 

 

 

Merchants & Southern Banks of Florida, Incorporated

 

On May 22, 2015, the Company completed its acquisition of all shares of the outstanding common stock of Merchants & Southern Banks of Florida, Incorporated (“Merchants”), a bank holding company headquartered in Gainesville, Florida, for a total purchase price of $50,000,000.  Upon consummation of the stock purchase, Merchants was merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, Merchant’s wholly owned banking subsidiary, Merchants and Southern Bank, was also merged with and into the Bank. The acquisition grew the Company’s existing market presence, as Merchants and Southern Bank had a total of 13 banking locations in Alachua, Marion and Clay Counties, Florida.

 

The acquisition of Merchants was accounted for using the purchase method of accounting in accordance with FASB ASC 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available. Management continues to evaluate fair value adjustments related to loans, premises, deferred taxes and core deposit intangible assets acquired. 

 

The following table presents the assets acquired and liabilities of Merchants assumed as of May 22, 2015 and their fair value estimates. The fair value adjustments shown in the following table continue to be evaluated by management and may be subject to further adjustment:

 

(Dollars in Thousands)  As Recorded by
Merchants
   Initial Fair
Value
Adjustments 
   Subsequent
Fair Value
Adjustments
   As Recorded
by Ameris 
 
Assets                    
Cash and cash equivalents  $7,527   $-   $-   $7,527 
Federal funds sold and interest-bearing balances   106,188    -    -    106,188 
Investment securities   164,421    (553)(a)   (639)(j)   163,229 
Other investments   872    -    -    872 
Loans   199,955    (8,500)(b)   -    191,455 
Less allowance for loan losses   (3,354)   3,354(c)   -    - 
Loans, net   196,601    (5,146)   -    191,455 
Other real estate owned   4,082    (1,115)(d)   -    2,967 
Premises and equipment   14,614    (3,680)(e)   -    10,934 
Intangible assets   -    4,577(f)   (634)(k)   3,943 
Other assets   2,333    2,335(g)   446(l)   5,114 
Total assets  $496,638   $(3,582)  $(827)  $492,229 
                     
Liabilities                    
Deposits:                    
Noninterest-bearing  $121,708   $-   $-   $121,708 
Interest-bearing   286,112    -    -    286,112 
Total deposits   407,820    -    -    407,820 
Federal funds purchased and securities sold under agreements to repurchase   41,588    -    -(m)   41,588 
Other liabilities   2,151    81(h)   -    2,232 
Subordinated deferrable interest debentures   6,186    (2,680)(i)   -    3,506 
Total liabilities   457,745    (2,599)   -    455,146 
Net identifiable assets acquired over (under) liabilities assumed   38,893    (983)   (827)   37,083 
Goodwill   -    12,090    827    12,917 
Net assets acquired over (under) liabilities assumed  $38,893   $11,107   $-   $50,000 
Consideration:                    
Cash exchanged for shares  $50,000                
Fair value of total consideration transferred  $50,000                

 

 8 

 

 

 

 

Explanation of fair value adjustments

 

(a)Adjustment reflects the fair value adjustments of the available for sale portfolio as of the acquisition date.

 

(b)Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

 

(c)Adjustment reflects the elimination of Merchant’s allowance for loan losses.

 

(d)Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired OREO portfolio.

 

(e)Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired premises.

 

(f)Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.

 

(g)Adjustment reflects the deferred taxes on the difference in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.

 

(h)Adjustment reflects the fair value adjustments based on the Company’s evaluation of interest rate swap liabilities.

 

(i)Adjustment reflects the fair value adjustment to the subordinated deferrable interest debentures at the acquisition date.

 

(j)Adjustment reflects the additional fair value adjustments of the available for sale portfolio as of the acquisition date.

 

(k)Adjustment reflects adjustment to the core deposit intangible on the acquired core deposit accounts.

 

(l)Adjustment reflects the additional deferred taxes on the difference in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.

 

(m)Subsequent to acquisition, the acquired securities sold under agreements to repurchase were converted to deposit accounts and are no longer reported as securities sold under agreements to repurchase on the Consolidated Balance Sheet as of September 30, 2015.

 

Goodwill of $12.9 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the Merchants acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.

 

In the acquisition, the Company purchased $191.5 million of loans at fair value, net of $8.5 million, or 4.25%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $17.4 million that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payment, management’s estimate of expected total cash payments and fair value of the loans as of acquisition date for purchased credit impaired loans. Contractually required principal and interest payment have been adjusted for estimated prepayments.

 

Contractually required principal and interest  $24,446 
Non-accretable difference   (3,814)
Cash flows expected to be collected   20,632 
Accretable yield   (3,254)
Total purchased credit-impaired loans acquired  $17,378 

 

The following table presents the acquired loan data for the Merchants acquisition.

 

   Fair Value of
Acquired Loans at 
Acquisition Date 
   Gross
Contractual
Amounts
Receivable at
Acquisition
Date 
   Best Estimate
at Acquisition
Date of
Contractual
Cash Flows
Not Expected
to be Collected
 
   (Dollars in Thousands) 
Acquired receivables subject to ASC 310-30  $17,378   $24,446   $3,814 
Acquired receivables not subject to ASC 310-30  $174,077   $178,763   $- 

 

 9 

 

 

Coastal Bankshares, Inc.

 

On June 30, 2014, the Company completed its acquisition of The Coastal Bankshares, Inc. (“Coastal”), a bank holding company headquartered in Savannah, Georgia.  Upon consummation of the acquisition, Coastal was merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, Coastal’s wholly owned banking subsidiary, The Coastal Bank (“Coastal Bank”), was also merged with and into the Bank. The acquisition grew the Company’s existing market presence, as Coastal Bank had a total of six banking locations in Chatham, Liberty and Effingham Counties, Georgia. Coastal’s common shareholders received 0.4671 of a share of the Company's common stock in exchange for each share of Coastal’s common stock. As a result, the Company issued 1,598,998 common shares at a fair value of $34.5 million and paid $2.8 million cash in exchange for outstanding warrants.

 

The acquisition of Coastal was accounted for using the purchase method of accounting in accordance with FASB ASC 805, Business Combinations. Assets acquired, liabilities assumed and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available. During the third quarter of 2014 and the second quarter of 2015, management revised its initial estimates regarding the valuation of other real estate owned. In addition, during the third and fourth quarters of 2014 and second quarter of 2015, management continued its assessment and recorded the deferred tax assets resulting from differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for income tax purposes. This estimate also reflects acquired net operating loss carryforwards and other acquired assets with built-in losses that are expected to be settled or otherwise recovered in future periods where the realization of such benefits would be subject to applicable limitations under Sections 382 of the Internal Revenue Code of 1986, as amended.

 10 

 

 

The following table presents the assets acquired and liabilities of Coastal assumed as of June 30, 2014 and their fair value estimates:

 

(Dollars in Thousands)  As Recorded by
Coastal
   Fair Value
Adjustments
   As Recorded
by Ameris
 
Assets               
Cash and cash equivalents  $3,895   $-   $3,895 
Federal funds sold and interest-bearing balances   15,923    -    15,923 
Investment securities   67,266    (500)(a)   66,766 
Other investments   975    -    975 
Mortgage loans held for sale   7,288    -    7,288 
Loans   296,141    (16,700)(b)   279,441 
Less allowance for loan losses   (3,218)   3,218(c)   - 
Loans, net   292,923    (13,482)   279,441 
Other real estate owned   14,992    (6,935)(d)   8,057 
Premises and equipment   11,882    -    11,882 
Intangible assets   507    4,035(e)   4,542 
Cash value of bank owned life insurance   7,812    -    7,812 
Other assets   14,898    (601)(f)   14,297 
Total assets  $438,361   $(17,483)  $420,878 
Liabilities               
Deposits:               
Noninterest-bearing  $80,012   $-   $80,012 
Interest-bearing   289,012    -    289,012 
Total deposits   369,024    -    369,024 
Federal funds purchased and securities sold under agreements to repurchase   5,428    -    5,428 
Other borrowings   22,005    -    22,005 
Other liabilities   6,192    -    6,192 
Subordinated deferrable interest debentures   15,465    (6,413)(g)   9,052 
Total liabilities   418,114    (6,413)   411,701 
Net identifiable assets acquired over (under) liabilities assumed   20,247    (11,070)   9,177 
Goodwill   -    28,093    28,093 
Net assets acquired over (under) liabilities assumed  $20,247   $17,023   $37,270 
Consideration:               
Ameris Bancorp common shares issued   1,598,998           
Purchase price per share of the Company's common stock  $21.56           
Company common stock issued   34,474           
Cash exchanged for shares   2,796           
Fair value of total consideration transferred  $37,270           

 

 

Explanation of fair value adjustments

 

(a)Adjustment reflects the fair value adjustments of the available for sale portfolio as of the acquisition date.

 

(b)Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

 

(c)Adjustment reflects the elimination of Coastal’s allowance for loan losses.

 

(d)Adjustment reflects the fair value adjustment based on the Company’s evaluation of the acquired OREO portfolio.

 

(e)Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.

 

 11 

 

 

(f)Adjustment reflects the deferred taxes on the difference in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.

 

(g)Adjustment reflects the fair value adjustment to the subordinated deferrable interest debentures at the acquisition date.

 

Goodwill of $28.1 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the Coastal acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.

 

In the acquisition, the Company purchased $279.4 million of loans at fair value, net of $16.7 million, or 5.64%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $29.3 million that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payment, management’s estimate of expected total cash payments and fair value of the loans as of acquisition date for purchased credit impaired loans. Contractually required principal and interest payment have been adjusted for estimated prepayments.

 

Contractually required principal and interest  $38,194 
Non-accretable difference   (5,632)
Cash flows expected to be collected   32,562 
Accretable yield   (3,282)
Total purchased credit-impaired loans acquired  $29,280 

 

The results of operations of Merchants and Coastal subsequent to the respective acquisition dates are included in the Company’s consolidated statements of operations. The following unaudited pro forma information reflects the Company’s estimated consolidated results of operations as if the acquisitions had occurred on January 1, 2014, unadjusted for potential cost savings (in thousands).

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2015   2014   2015   2014 
                 
Net interest income and noninterest income  $72,377   $60,613   $195,685   $177,067 
Net income (loss)  $15,627   $12,798   $26,366   $29,961 
Net income (loss) available to common stockholders  $15,627   $12,798   $26,366   $29,675 
Income (loss) per common share available to common stockholders – basic  $0.49   $0.48   $0.83   $1.09 
Income (loss) per common share available to common stockholders – diluted  $0.48   $0.47   $0.82   $1.07 
Average number of shares outstanding, basic   32,195    26,773    31,614    27,304 
Average number of shares outstanding, diluted   32,553    27,161    31,962    27,698 

 

A rollforward of purchased non-covered loans for the nine months ended September 30, 2015, the year ended December 31, 2014 and the nine months ended September 30, 2014 is shown below:

 

(Dollars in Thousands)

 

September 30,
2015

  

December 31,
2014

  

September 30,
2014

 
Balance, January 1  $674,239   $448,753   $448,753 
Charge-offs, net of recoveries   (814)   (84)   - 
Additions due to acquisitions   195,818    279,441    279,441 
Accretion   8,055    9,745    6,171 
Transfers to purchased non-covered other real estate owned   (2,565)   (4,160)   (1,425)
Transfer from covered loans due to loss-share expiration   15,462    15,475    - 
Payments received   (123,311)   (74,931)   (59,216)
Other   610    -    - 
Ending balance  $767,494   $674,239   $673,724 

 

 12 

 

 

The following is a summary of changes in the accretable discounts of purchased non-covered loans during the nine months ended September 30, 2015, the year ended December 31, 2014 and the nine months ended September 30, 2014:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Balance, January 1  $25,716   $26,189   $26,189 
Additions due to acquisitions   4,686    7,799    7,799 
Accretion   (8,055)   (9,745)   (5,840)
Accretable discounts removed due to charge-offs   (1,686)   -    - 
Transfers between non-accretable and accretable discounts, net   (106)   1,473    916 
Ending balance  $20,555   $25,716   $29,064 

 

NOTE 4 – INVESTMENT SECURITIES

 

The Company’s investment policy blends the Company’s liquidity needs and interest rate risk management with its desire to increase income and provide funds for expected growth in loans. The investment securities portfolio consists primarily of U.S. government sponsored mortgage-backed securities and agencies, state, county and municipal securities and corporate debt securities. The Company’s portfolio and investing philosophy concentrate activities in obligations where the credit risk is limited. For the small portion of the Company’s portfolio found to present credit risk, the Company has reviewed the investments and financial performance of the obligors and believes the credit risk to be acceptable.

 

The amortized cost and estimated fair value of investment securities available for sale at September 30, 2015, December 31, 2014 and September 30, 2014 are presented below:

 

   Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
   Fair
Value
 
   (Dollars in Thousands) 
September 30, 2015:                
U. S. government agencies  $14,957   $26   $(15)  $14,968 
State, county and municipal securities   161,509    3,875    (519)   164,865 
Corporate debt securities   5,901    150    (19)   6,032 
Mortgage-backed securities   622,313    5,208    (2,001)   625,520 
Total securities  $804,680   $9,259   $(2,554)  $811,385 
                     
December 31, 2014:                    
U. S. government agencies  $14,953   $-   $(275)  $14,678 
State, county and municipal securities   137,873    3,935    (433)   141,375 
Corporate debt securities   10,812    228    -    11,040 
Mortgage-backed securities   369,581    6,534    (1,403)   374,712 
Total securities  $533,219   $10,697   $(2,111)  $541,805 
                     
September 30, 2014:                    
U. S. government agencies  $14,951   $-   $(491)  $14,460 
State, county and municipal securities   134,641    3,708    (714)   137,635 
Corporate debt securities   10,801    237    (73)   10,965 
Mortgage-backed securities   364,399    4,493    (2,443)   366,449 
Total securities  $524,792   $8,438   $(3,721)  $529,509 

 

 

 13 

 

 

The amortized cost and fair value of available-for-sale securities at September 30, 2015 by contractual maturity are summarized in the table below. Expected maturities for mortgage-backed securities may differ from contractual maturities because in certain cases borrowers can prepay obligations without prepayment penalties. Therefore, these securities are not included in the following maturity summary.

 

   Amortized
Cost
   Fair
Value
 
   (Dollars in Thousands) 
Due in one year or less  $4,574   $4,604 
Due from one year to five years   48,907    50,206 
Due from five to ten years   63,934    65,751 
Due after ten years   64,952    65,304 
Mortgage-backed securities   622,313    625,520 
   $804,680   $811,385 

 

Securities with a carrying value of approximately $381.9 million serve as collateral to secure public deposits and for other purposes required or permitted by law at September 30, 2015, compared with $286.6 million and $265.9 million at December 31, 2014 and September 30, 2014, respectively.

 

The following table details the gross unrealized losses and fair value of securities aggregated by category and duration of continuous unrealized loss position at September 30, 2015, December 31, 2014 and September 30, 2014.

 

   Less Than 12 Months   12 Months or More   Total 
Description of Securities  Fair
Value
   Unrealized
Losses
   Fair
Value
   Unrealized
Losses
   Fair
Value
   Unrealized
Losses
 
   (Dollars in Thousands) 
September 30, 2015:                        
U. S. government agencies  $-   $-   $4,985   $(15)  $4,985   $(15)
State, county and municipal securities   28,339    (297)   10,451    (222)   38,790    (519)
Corporate debt securities   894    (19)   -    -    894    (19)
Mortgage-backed securities   213,439    (1,184)   30,708    (817)   244,147    (2,001)
                               
Total temporarily impaired securities  $242,672   $(1,500)  $46,144   $(1,054)  $288,816   $(2,554)
                               
December 31, 2014:                              
U. S. government agencies  $-   $-   $14,678   $(275)  $14,678   $(275)
State, county and municipal securities   15,038    (70)   19,665    (363)   34,703    (433)
Corporate debt securities   -    -    -    -    -    - 
Mortgage-backed securities   36,760    (221)   46,812    (1,182)   83,572    (1,403)
                               
Total temporarily impaired securities  $51,798   $(291)  $81,155   $(1,820)  $132,953   $(2,111)
                               
September 30, 2014:                              
U. S. government agencies  $-   $-   $14,460   $(491)  $14,460   $(491)
State, county and municipal securities   10,296    (98)   22,696    (616)   32,992    (714)
Corporate debt securities   -    -    4,997    (73)   4,997    (73)
Mortgage-backed securities   71,050    (416)   51,314    (2,027)   122,364    (2,443)
                               
Total temporarily impaired securities  $81,346   $(514)  $93,467   $(3,207)  $174,813   $(3,721)

 

As of September 30, 2015, the Company’s security portfolio consisted of 369 securities, 111 of which were in an unrealized loss position. The majority of unrealized losses are related to the Company’s mortgage-backed and state, county and municipal securities, as discussed below.

 

At September 30, 2015, the Company held 84 mortgage-backed securities that were in an unrealized loss position, all of which were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2015.

 

 14 

 

 

At September 30, 2015, the Company held 24 state, county and municipal securities, one U.S. government-sponsored agency security, and two corporate securities that were in an unrealized loss position. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2015.

 

During the first nine months of 2015 and 2014, the Company received timely and current interest and principal payments on all of the securities classified as corporate debt securities. During the third quarter of 2015, the Company received all interest payments due on a security that had previously deferred interest since the fourth quarter of 2010. The Company’s investments in subordinated debt include investments in regional and super-regional banks on which the Company prepares regular analysis through review of financial information and credit ratings. Investments in preferred securities are also concentrated in the preferred obligations of regional and super-regional banks through non-pooled investment structures. The Company did not have investments in “pooled” trust preferred securities at September 30, 2015, December 31, 2014 or September 30, 2014.

 

Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. While the majority of the unrealized losses on debt securities relate to changes in interest rates, corporate debt securities have also been affected by reduced levels of liquidity and higher risk premiums. Occasionally, management engages independent third parties to evaluate the Company’s position in certain corporate debt securities to aid management and the ALCO Committee in its determination regarding the status of impairment. The Company believes that each investment poses minimal credit risk and further, that the Company does not intend to sell these investment securities at an unrealized loss position at September 30, 2015, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at September 30, 2015, these investments are not considered impaired on an other-than-temporary basis.

 

The following table is a summary of sales activities in the Company’s investment securities available for sale for the nine months ended September 30, 2015, year ended December 31, 2014 and nine months ended September 30, 2014:

 

   September 30, 2015   December 31, 2014   September 30, 2014 
   (Dollars in Thousands) 
Gross gains on sales of securities  $396   $141   $141 
Gross losses on sales of securities   (259)   (3)   (3)
Net realized gains on sales of securities available for sale  $137   $138   $138 
Sales proceeds  $69,208   $94,051   $92,975 

 

 

 15 

 

 

NOTE 5 – LOANS

 

The Company engages in a full complement of lending activities, including real estate-related loans, agriculture-related loans, commercial and financial loans and consumer installment loans within select markets in Georgia, Alabama, Florida and South Carolina. Ameris concentrates the majority of its lending activities in real estate loans. While the risk of loss in the Company’s portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond the Company’s control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio.

 

Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production and other business purposes. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Company evaluates the financial strength, cash flow, management, credit history of the borrower and the quality of the collateral securing the loan. The Bank often requires personal guarantees and secondary sources of repayment on commercial, financial and agricultural loans.

 

Real estate loans include construction and development loans, commercial and farmland loans and residential loans. Construction and development loans include loans for the development of residential neighborhoods, one-to-four family residential construction loans to builders and consumers, and commercial real estate construction loans, primarily for owner-occupied properties. The Company limits its construction lending risk through adherence to established underwriting procedures. Commercial real estate loans include loans secured by owner-occupied commercial buildings for office, storage, retail, farmland and warehouse space. They also include non-owner occupied commercial buildings such as leased retail and office space. Commercial real estate loans may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. The Company's residential loans represent permanent mortgage financing and are secured by residential properties located within the Bank's market areas.

 

Consumer installment loans and other loans include automobile loans, boat and recreational vehicle financing, and secured and unsecured personal loans. Consumer loans carry greater risks than other loans, as the collateral can consist of rapidly depreciating assets such as automobiles and equipment that may not provide an adequate source of repayment of the loan in the case of default.

 

Loans are stated at unpaid balances, net of unearned income and deferred loan fees. Balances within the major loans receivable categories are presented in the following table, excluding purchased non-covered and covered loans:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Commercial, financial and agricultural  $427,747   $319,654   $334,783 
Real estate – construction and development   220,798    161,507    154,315 
Real estate – commercial and farmland   1,067,828    907,524    882,160 
Real estate – residential   532,285    456,106    436,515 
Consumer installment   31,299    30,782    31,403 
Other   10,692    14,308    9,583 
   $2,290,649   $1,889,881   $1,848,759 

 

Purchased non-covered loans are defined as loans that were acquired in bank acquisitions that are not covered by a loss-sharing agreement with the FDIC, including purchased loans where the loss-sharing agreement with the FDIC has expired. Purchased non-covered loans totaling $767.5 million, $674.2 million and $673.7 million at September 30, 2015, December 31, 2014 and September 30, 2014, respectively, are not included in the above schedule.

 

Purchased non-covered loans are shown below according to major loan type as of the end of the periods shown:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Commercial, financial and agricultural  $42,350   $38,041   $38,077 
Real estate – construction and development   71,109    58,362    60,262 
Real estate – commercial and farmland   385,032    306,706    296,790 
Real estate – residential   263,312    266,342    273,347 
Consumer installment   5,691    4,788    5,248 
   $767,494   $674,239   $673,724 

 

Purchased loan pools are defined as groups of loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of September 30, 2015, purchased loan pools totaled $410.1 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $402.1 million and $8.0 million of purchase premium paid at acquisition. At September 30, 2015, all loans included in the purchased loan pools were performing current loans, all risk-rated grade 20. The Company did not have any purchased loan pools at December 31, 2014 or September 30, 2014.

 

 16 

 

 

Covered loans are defined as loans that were acquired in FDIC-assisted transactions that are covered by a loss-sharing agreement with the FDIC. Covered loans totaling $191.0 million, $271.3 million and $313.6 million at September 30, 2015, December 31, 2014 and September 30, 2014, respectively, are not included in the above schedules.

 

Covered loans are shown below according to loan type as of the end of the periods shown:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Commercial, financial and agricultural  $13,349   $21,467   $22,545 
Real estate – construction and development   14,266    23,447    27,756 
Real estate – commercial and farmland   103,399    147,627    180,566 
Real estate – residential   59,835    78,520    82,445 
Consumer installment   172    218    277 
   $191,021   $271,279   $313,589 

 

Nonaccrual and Past Due Loans

 

A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged against interest income. Interest payments on nonaccrual loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.  Past due loans are loans whose principal or interest is past due 90 days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms.

 

The following table presents an analysis of loans accounted for on a nonaccrual basis, excluding purchased non-covered and covered loans:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Commercial, financial and agricultural  $1,995   $1,672   $2,695 
Real estate – construction and development   1,753    3,774    3,037 
Real estate – commercial and farmland   11,645    8,141    8,983 
Real estate – residential   4,810    7,663    7,608 
Consumer installment   355    478    487 
   $20,558   $21,728   $22,810 

 

The following table presents an analysis of purchased non-covered loans accounted for on a nonaccrual basis:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Commercial, financial and agricultural  $214   $175   $54 
Real estate – construction and development   916    1,119    1,969 
Real estate – commercial and farmland   4,728    10,242    8,776 
Real estate – residential   5,464    6,644    6,132 
Consumer installment   52    69    76 
   $11,374   $18,249   $17,007 

 

 The following table presents an analysis of covered loans accounted for on a nonaccrual basis:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Commercial, financial and agricultural  $7,916   $8,541   $8,441 
Real estate – construction and development   2,934    7,601    8,896 
Real estate – commercial and farmland   18,164    12,584    14,617 
Real estate – residential   3,979    6,595    7,227 
Consumer installment   91    91    102 
   $33,084   $35,412   $39,283 

  

 17 

 

 

The following table presents an aging analysis of loans, excluding purchased non-covered and covered past due loans as of September 30, 2015, December 31, 2014 and September 30, 2014:

 

   Loans
30-59
Days Past
Due
   Loans
60-89
Days
Past Due
   Loans 90
or More
Days Past
Due
   Total
Loans
Past Due
   Current
Loans
   Total
Loans
   Loans 90
Days or
More Past
Due  and
Still
Accruing
 
   (Dollars in Thousands) 
As of September 30, 2015:                            
Commercial, financial &
 agricultural
  $781   $714   $1,799   $3,294   $424,453   $427,747   $- 
Real estate – construction & development   1,184    417    1,753    3,354    217,444    220,798    - 
Real estate – commercial &
farmland
   4,275    399    8,082    12,756    1,055,072    1,067,828    - 
Real estate – residential   6,424    1,558    4,247    12,229    520,056    532,285    - 
Consumer installment loans   326    82    227    635    30,664    31,299    - 
Other   -    -    -    -    10,692    10,692    - 
Total  $12,990   $3,170   $16,108   $32,268   2,258,381   2,290,649   $- 

 

   Loans
30-59
Days Past
Due
   Loans
60-89
Days
Past Due
   Loans 90
or More
Days Past
Due
   Total
Loans
Past Due
   Current
Loans
   Total
Loans
   Loans 90
Days or
More Past
Due  and
Still
Accruing
 
   (Dollars in Thousands) 
As of December 31, 2014:                            
Commercial, financial &
 agricultural
  $900   $233   $1,577   $2,710   $316,944   $319,654   $- 
Real estate – construction & development   1,382    286    3,367    5,035    156,472    161,507    - 
Real estate – commercial &
farmland
   2,859    635    7,668    11,162    896,362    907,524    - 
Real estate – residential   3,953    2,334    6,755    13,042    443,064    456,106    - 
Consumer installment loans   634    158    366    1,158    29,624    30,782    1 
Other   -    -    -    -    14,308    14,308    - 
Total  $9,728   $3,646   $19,733   $33,107   1,856,774   1,889,881   $1 

 

   Loans
30-59
Days Past
Due
   Loans
60-89
Days
Past Due
   Loans 90
or More
Days Past
Due
   Total
Loans
Past Due
   Current
Loans
   Total
Loans
   Loans 90
Days or
More Past
Due and
Still
Accruing
 
   (Dollars in Thousands) 
As of September 30, 2014:                            
Commercial, financial &
agricultural
  $271   $400   $2,483   $3,154   $331,629   $334,783   $- 
Real estate – construction & development   1,232    285    2,899    4,416    149,899    154,315    - 
Real estate – commercial &
farmland
   3,025    484    8,918    12,427    869,733    882,160    - 
Real estate – residential   4,416    2,085    7,303    13,804    422,711    436,515    - 
Consumer installment loans   333    113    396    842    30,561    31,403    - 
Other   -    -    -    -    9,583    9,583    - 
Total  $9,277   $3,367   $21,999   $34,643   1,814,116   1,848,759   $- 

 

 18 

 

  

The following table presents an analysis of purchased non-covered past due loans as of September 30, 2015, December 31, 2014 and September 30, 2014:

 

  

Loans
30-59
Days Past
Due

  

Loans
60-89
Days
Past Due

  

Loans 90
or More
Days Past
Due

  

Total
Loans
Past Due

  

Current
Loans

  

Total
Loans

  

Loans 90
Days or
More Past
Due  and
Still
Accruing

 
  

(Dollars in Thousands)

 
As of September 30, 2015:                            
Commercial, financial &
 agricultural
  $140   $11   $112   $263   $42,087   $42,350   $- 
Real estate – construction & development   322    -    459    781    70,328    71,109    - 
Real estate – commercial &
farmland
   2,681    613    3,391    6,685    378,347    385,032    - 
Real estate – residential   3,822    1,672    4,901    10,395    252,917    263,312    - 
Consumer installment loans   5    -    49    54    5,637    5,691    - 
Total  $6,970   $2,296   $8,912   $18,178   $749,316   $767,494   $- 

 

   Loans
30-59
Days Past
Due
   Loans
60-89
Days
Past Due
   Loans 90
or More
Days Past
Due
   Total
Loans
Past Due
   Current
Loans
   Total
Loans
   Loans 90
Days or
More Past
Due  and
Still
Accruing
 
   (Dollars in Thousands) 
As of December 30, 2014:                            
Commercial, financial &
 agricultural
  $461   $90   $175   $726   $37,315   $38,041   $- 
Real estate – construction & development   790    1,735    1,117    3,642    54,720    58,362    - 
Real estate – commercial &
farmland
   2,107    1,194    9,529    12,830    293,876    306,706    - 
Real estate – residential   6,907    1,401    6,369    14,677    251,665    266,342    - 
Consumer installment loans   82    -    65    147    4,641    4,788    - 
Total  $10,347   $4,420   $17,255   $32,022   $642,217   $674,239   $- 

 

   Loans
30-59
Days Past
Due
   Loans
60-89
Days
Past Due
   Loans 90
or More
Days Past
Due
   Total
Loans
Past Due
   Current
Loans
   Total
Loans
   Loans 90
Days or
More Past
Due and
Still
Accruing
 
   (Dollars in Thousands) 
As of September 30, 2014:                            
Commercial, financial &
agricultural
  $33   $46   $55   $134   $37,943   $38,077   $- 
Real estate – construction & development   520    135    3,069    3,724    56,538    60,262    1,100 
Real estate – commercial &
farmland
   3,497    1,227    8,266    12,990    283,800    296,790    258 
Real estate – residential   3,915    1,440    5,929    11,284    262,063    273,347    - 
Consumer installment loans   36    5    76    117    5,131    5,248    - 
Total  $8,001   $2,853   $17,395   $28,249   $645,475   $673,724   $1,358 

 

 19 

 

 

The following table presents an aging analysis of covered loans as of September 30, 2015, December 31, 2014 and September 30, 2014:

 

   Loans
30-59
Days Past
Due
   Loans
60-89
Days
Past Due
   Loans 90
or More
Days Past
Due
   Total
Loans
Past Due
   Current
Loans
   Total
Loans
   Loans 90
Days or
More Past
Due  and
Still
Accruing
 
   (Dollars in Thousands) 
As of September 30, 2015:                            
Commercial, financial &
 agricultural
  $40   $48   $7,886   $7,974   $5,375   $13,349   $- 
Real estate – construction & development   1,548    68    2,408    4,024    10,242    14,266    - 
Real estate – commercial &
farmland
   1,003    550    6,573    8,126    95,273    103,399    - 
Real estate – residential   2,612    783    2,140    5,535    54,300    59,835    - 
Consumer installment loans   -    -    49    49    123    172    - 
Total  $5,203   $1,449   $19,056   $25,708   $165,313   $191,021   $- 

 

   Loans
30-59
Days Past
Due
   Loans
60-89
Days
Past Due
   Loans 90
or More
Days Past
Due
   Total
Loans
Past Due
   Current
Loans
   Total
Loans
   Loans 90
Days or
More Past
Due  and
Still
Accruing
 
   (Dollars in Thousands) 
As of December 31, 2014:                            
Commercial, financial &
 agricultural
  $451   $136   $1,878   $2,465   $19,002   $21,467   $- 
Real estate – construction & development   238    226    6,703    7,167    16,280    23,447    - 
Real estate – commercial &
farmland
   4,371    1,486    7,711    13,568    134,059    147,627    714 
Real estate – residential   3,464    962    5,656    10,082    68,438    78,520    - 
Consumer installment loans   10    -    91    101    117    218    - 
Total  $8,534   $2,810   $22,039   $33,383   $237,896   $271,279   $714 

 

   Loans
30-59
Days Past
Due
   Loans
60-89
Days
Past Due
   Loans 90
or More
Days Past
Due
   Total
Loans
Past Due
   Current
Loans
   Total
Loans
   Loans 90
Days or
More Past
Due and
Still
Accruing
 
   (Dollars in Thousands) 
As of September 30, 2014:                            
Commercial, financial &
agricultural
  $568   $188   $1,978   $2,734   $19,811   $22,545   $- 
Real estate – construction & development   632    72    8,659    9,363    18,393    27,756    - 
Real estate – commercial &
farmland
   7,100    322    8,930    16,352    164,214    180,566    305 
Real estate – residential   2,694    1,473    5,563    9,730    72,715    82,445    65 
Consumer installment loans   2    7    101    110    167    277    - 
Total  $10,996   $2,062   $25,231   $38,289   275,300   $313,589   $370 

 

 20 

 

 

  

Impaired Loans

 

Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. When determining if the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement, the Company considers the borrower’s capacity to pay, which includes such factors as the borrower’s current financial statements, an analysis of global cash flow sufficient to pay all debt obligations and an evaluation of secondary sources of repayment, such as guarantor support and collateral value. Impaired loans include loans on nonaccrual status and troubled debt restructurings. The Company individually assesses for impairment all nonaccrual loans greater than $200,000 and rated substandard or worse and all troubled debt restructurings greater than $100,000. If a loan is deemed impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis.

 

 21 

 

 

The following is a summary of information pertaining to impaired loans, excluding purchased non-covered and covered loans:

 

   As of and For the Period Ended 
  

September 30,
2015

 
  

December 31,
2014

 
  

September 30,
2014

 
 
   (Dollars in Thousands) 
Nonaccrual loans  $20,558   $21,728   $22,810 
Troubled debt restructurings not included above   12,075    12,759    17,261 
Total impaired loans  $32,633   $34,487   $40,071 
                
Quarter-to-date interest income recognized on impaired loans  $241   $237   $332 
Year-to-date interest income recognized on impaired loans  $635   $1,991   $1,754 
Quarter-to-date foregone interest income on impaired loans  $309   $323   $353 
Year-to-date foregone interest income on impaired loans  $939   $1,491   $1,168 

 

The following table presents an analysis of information pertaining to impaired loans, excluding purchased non-covered and covered loans as of September 30, 2015, December 31, 2014 and September 30, 2014:

 

  

Unpaid
Contractual
Principal
Balance

  

Recorded
Investment
With No
Allowance

  

Recorded
Investment
With
Allowance

 
  

Total
Recorded
Investment

 
  

Related Allowance

 
  

Three Month Average Recorded Investment

 
  

Nine Month Average
Recorded
Investment

 
 
  

(Dollars in Thousands)

 
As of September 30, 2015:                            
Commercial, financial & agricultural  $3,761   $471   $1,762   $2,233   $528   $3,289   $2,458 
Real estate – construction & development   3,757    230    2,361    2,591    731    2,503    3,384 
Real estate – commercial & farmland   18,652    5,870    11,494    17,364    1,635    16,459    15,684 
Real estate – residential   11,549    1,752    8,266    10,018    1,872    10,185    11,509 
Consumer installment loans   524    -    426    426    7    483    487 
Total  $38,243   $8,323   $24,309   $32,632   $4,773   $32,919   $33,522 

 

   Unpaid
Contractual
Principal
Balance
   Recorded
Investment
With No
Allowance
   Recorded
Investment
With
Allowance
   Total
Recorded
Investment
   Related
Allowance
   Three Month
Average
Recorded
Investment
   Twelve Month
Average
Recorded
Investment
 
   (Dollars in Thousands) 
As of December 31, 2014:                                   
Commercial, financial & agricultural  $3,387   $6   $1,956   $1,962   $395   $2,457   $3,021 
Real estate – construction & development   8,325    448    4,005    4,453    771    4,703    5,368 
Real estate – commercial & farmland   17,514    4,967    9,651    14,618    1,859    15,341    15,972 
Real estate – residential   15,571    3,514    9,407    12,921    974    14,244    16,317 
Consumer installment loans   618    -    533    533    9    527    519 
Total  $45,415   $8,935   $25,552   $34,487   $4,008   $37,272   $41,197 

  

   Unpaid
Contractual
Principal
Balance
   Recorded
Investment
With No
Allowance
   Recorded
Investment
With
Allowance
   Total
Recorded
Investment
   Related
Allowance
   Three Month
Average
Recorded
Investment
   Nine Month
Average
Recorded
Investment
 
   (Dollars in Thousands) 
As of September 30, 2014:                                   
Commercial, financial & agricultural  $4,445   $8   $2,943   $2,951   $631   $2,402   $3,285 
Real estate – construction & development   8,824    211    4,743    4,954    612    5,243    5,596 
Real estate – commercial & farmland   18,955    7,311    8,753    16,064    1,698    16,242    16,312 
Real estate – residential   18,251    5,635    9,946    15,581    1,286    15,356    17,169 
Consumer installment loans   606    -    521    521    10    517    516 
                                    
Total  $51,081   $13,165   $26,906   $40,071   $4,237   $39,760   $42,878 

 

 22 

 

 

The following is a summary of information pertaining to purchased non-covered impaired loans:

 

   As of and For the Period Ended 
   September 30,
2015
   December 31,
2014
   September 30,
2014
 
   (Dollars in Thousands) 
Nonaccrual loans  $11,374   $18,249   $17,007 
Troubled debt restructurings not included above   7,188    1,212    583 
Total impaired loans  $18,562   $19,461   $17,590 
                
Quarter-to-date interest income recognized on impaired loans  $158   $64   $27 
Year-to-date interest income recognized on impaired loans  $342   $132   $68 
Quarter-to-date foregone interest income on impaired loans  $198   $521   $587 
Year-to-date foregone interest income on impaired loans  $1,121   $1,759   $1,239 

 

The following table presents an analysis of information pertaining to purchased non-covered impaired loans as of September 30, 2015, December 31, 2014 and September 30, 2014:

 

   Unpaid
Contractual
Principal
Balance
   Recorded
Investment
With No
Allowance
   Recorded
Investment
With
Allowance
   Total
Recorded
Investment
   Related
Allowance
   Three Month
Average
Recorded
Investment
   Nine Month
Average
Recorded
Investment
 
   (Dollars in Thousands) 
As of September 30, 2015:                                   
Commercial, financial & agricultural  $1,137   $214   $-   $214   $-   $262   $224 
Real estate – construction & development   9,211    1,268    -    1,268    -    1,563    1,419 
Real estate – commercial & farmland   13,399    8,799    -    8,799    -    11,245    10,724 
Real estate – residential   12,443    8,224    -    8,224    -    8,255    7,845 
Consumer installment loans   74    57    -    57    -    76    63 
Total  $36,264   $18,562   $-   $18,562   $-   $21,402   $20,275 

 

   Unpaid
Contractual
Principal
Balance
   Recorded
Investment
With No
Allowance
   Recorded
Investment
With
Allowance
   Total
Recorded
Investment
   Related
Allowance
   Three Month
Average
Recorded
Investment
   Twelve Month
Average
Recorded
Investment
 
   (Dollars in Thousands) 
As of December 31, 2014:                                   
Commercial, financial & agricultural  $1,366   $175   $-   $175   $-   $277   $165 
Real estate – construction & development   5,161    1,436    -    1,436    -    2,242    1,643 
Real estate – commercial & farmland   15,007    10,588    -    10,588    -    11,148    7,484 
Real estate – residential   12,283    7,191    -    7,191    -    8,447    7,084 
Consumer installment loans   172    71    -    71    -    124    68 
Total  $33,989   $19,461   $-   $19,461   $-   $22,238   $16,444 

 

                             
  

Unpaid
Contractual
Principal
Balance

  

Recorded
Investment
With No
Allowance

  

Recorded
Investment
With
Allowance

  

Total
Recorded
Investment

  

Related Allowance

  

Three Month Average Recorded Investment

  

Nine Month Average
Recorded
Investment

 
  

(Dollars in Thousands)

 
As of September 30, 2014:                                   
Commercial, financial & agricultural   $438   $54   $-   $54   $-   $98   $81 
Real estate – construction & development    3,794    2,274    -    2,274    -    2,273    1,501 
Real estate – commercial & farmland    12,354    8,776    -    8,776    -    7,712    5,976 
Real estate – residential    9,610    6,407    -    6,407    -    6,533    6,233 
Consumer installment loans    184    79    -    79    -    64    43 
Total   $26,380   $17,590   $-   $17,590   $-   $16,680   $13,834 

  

 23 

 

 

The following is a summary of information pertaining to covered impaired loans:

 

   As of and For the Period Ended 
   September 30,
2015
   December 31,
2014
   September 30,
2014
 
   (Dollars in Thousands) 
Nonaccrual loans  $33,084   $35,412   $39,283 
Troubled debt restructurings not included above   16,576    22,619    22,757 
Total impaired loans  $49,660   $58,031   $62,040 
                
Quarter-to-date interest income recognized on impaired loans  $268   $443   $420 
Year-to-date interest income recognized on impaired loans  $732   $2,057   $1,614 
Quarter-to-date foregone interest income on impaired loans  $468   $571   $660 
Year-to-date foregone interest income on impaired loans  $1,416   $3,123   $2,552 

 

The following table presents an analysis of information pertaining to covered impaired loans as of September 30, 2015, December 31, 2014 and September 30, 2014:

 

   Unpaid
Contractual
Principal
Balance
   Recorded
Investment
With No
Allowance
   Recorded
Investment
With
Allowance
   Total
Recorded
Investment
   Related
Allowance
   Three Month
Average
Recorded
Investment
   Nine Month
Average
Recorded
Investment
 
   (Dollars in Thousands) 
As of September 30, 2015:                            
Commercial, financial & agricultural  $11,794   $7,918   $-   $7,918   $-   $8,625   $8,560 
Real estate – construction & development   29,596    5,780    -    5,780    -    6,166    8,013 
Real estate – commercial & farmland   41,724    21,265    -    21,265    -    20,697    21,380 
Real estate – residential   18,097    14,605    -    14,605    -    14,881    16,465 
Consumer installment loans   126    92    -    92    -    101    96 
Total  $101,337   $49,660   $-   $49,660   $-   $50,470   $54,514 

 

   Unpaid
Contractual
Principal
Balance
   Recorded
Investment
With No
Allowance
   Recorded
Investment
With
Allowance
   Total
Recorded
Investment
   Related
Allowance
   Three Month
Average
Recorded
Investment
   Twelve Month
Average
Recorded
Investment
 
   (Dollars in Thousands) 
As of December 31, 2014:                            
Commercial, financial & agricultural  $14,385   $8,582   $-   $8,582   $-   $8,525   $9,325 
Real estate – construction & development   27,289    10,638    -    10,638    -    11,279    13,935 
Real estate – commercial & farmland   31,309    20,663    -    20,663    -    21,890    28,057 
Real estate – residential   22,860    18,054    -    18,054    -    18,242    20,776 
Consumer installment loans   124    94    -    94    -    100    160 
Total  $95,967   $58,031   $-   $58,031   $-   $60,036   $72,253 

 

   Unpaid
Contractual
Principal
Balance
   Recorded
Investment
With No
Allowance
   Recorded
Investment
With
Allowance
   Total
Recorded
Investment
   Related
Allowance
   Three Month
Average
Recorded
Investment
   Nine Month
Average
Recorded
Investment
 
   (Dollars in Thousands) 
As of September 30, 2014:                            
Commercial, financial & agricultural  $11,356   $8,467   $-   $8,467   $-   $10,367   $9,511 
Real estate – construction & development   13,268    11,920    -    11,920    -    11,484    14,760 
Real estate – commercial & farmland   26,624    23,118    -    23,118    -    23,562    29,904 
Real estate – residential   20,331    18,430    -    18,430    -    19,112    21,456 
Consumer installment loans   134    105    -    105    -    116    177 
Total  $71,713   $62,040   $-   $62,040   $-   $64,641   $75,808 

 

 24 

 

 

Credit Quality Indicators

 

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. Procedures provide for the assignment of a risk rating for every loan included in the total loan portfolio, with the exception of certain mortgage loans serviced at a third party, mortgage warehouse lines and overdraft protection loans, which are treated as pools for risk-rating purposes. Relationships greater than $1.0 million and a sample of relationships greater than $250,000 are reviewed annually by the Bank’s independent internal loan review department. The following is a description of the general characteristics of the grades:

 

Grade 10 – Prime Credit – This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by cash or cash equivalents.

 

Grade 15 – Good Credit – This grade includes loans that exhibit one or more characteristics better than that of a Satisfactory Credit. Generally, the debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.

 

Grade 20 – Satisfactory Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.

 

Grade 23 – Performing, Under-Collateralized Credit – This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibit a loan-to-value ratio greater than 110%, based on a documented collateral valuation.

 

Grade 25 – Minimum Acceptable Credit – This grade includes loans which exhibit all the characteristics of a Satisfactory Credit, but warrant more than normal level of banker supervision due to (i) circumstances which elevate the risks of performance (such as start-up operations, untested management, heavy leverage and interim losses); (ii) adverse, extraordinary events that have affected, or could affect, the borrower’s cash flow, financial condition, ability to continue operating profitability or refinancing (such as death of principal, fire and divorce); (iii) loans that require more than the normal servicing requirements (such as any type of construction financing, acquisition and development loans, accounts receivable or inventory loans and floor plan loans); (iv) existing technical exceptions which raise some doubts about the Bank’s perfection in its collateral position or the continued financial capacity of the borrower; or (v) improvements in formerly criticized borrowers, which may warrant banker supervision.

 

Grade 30 – Other Asset Especially Mentioned – This grade includes loans that exhibit potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

 

Grade 40 – Substandard – This grade represents loans which are inadequately protected by the current credit quality and paying capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses or questionable collateral values.

 

Grade 50 – Doubtful – This grade includes loans which exhibit all of the characteristics of a substandard loan with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.

 

Grade 60 – Loss – This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loss has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.

 

 25 

 

 

  

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of September 30, 2015:

 

Risk
Grade
  Commercial,
financial &
agricultural
   Real estate -
construction &
development
   Real estate -
commercial &
farmland
   Real estate -
residential
   Consumer
installment loans
   Other   Total 
   (Dollars in Thousands) 
10  $222,693   $294   $116   $1,490   $6,688   $-   $231,281 
15   23,807    2,150    123,515    83,361    1,352    -    234,185 
20   99,414    45,091    645,949    327,576    19,302    10,692    1,148,024 
23   645    7,754    11,792    6,240    46    -    26,477 
25   75,635    159,944    250,575    90,320    3,168    -    579,642 
30   2,378    2,035    9,762    7,811    204    -    22,190 
40   3,175    3,530    26,119    15,487    537    -    48,848 
50   -    -    -    -    2    -    2 
60   -    -    -    -    -    -    - 
Total   $427,747   $220,798   $1,067,828   $532,285   $31,299   $10,692   $2,290,649 

 

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of December 31, 2014:

 

Risk
Grade
  Commercial,
financial &
agricultural
   Real estate -
construction &
development
   Real estate -
commercial &
farmland
   Real estate -
residential
   Consumer
installment loans
   Other   Total 
   (Dollars in Thousands) 
10  $121,355   $268   $155   $226   $6,573   $-   $128,577 
15   25,318    4,010    128,170    59,301    1,005    -    217,804 
20   100,599    47,541    511,198    256,758    17,544    14,308    947,948 
23   56    8,933    10,507    9,672    37    -    29,205 
25   62,519    93,514    224,464    102,998    4,692    -    488,187 
30   3,758    1,474    13,035    7,459    257    -    25,983 
40   6,049    5,767    19,995    19,692    673    -    52,176 
50   -    -    -    -    1    -    1 
60   -    -    -    -    -    -    - 
Total   $319,654   $161,507   $907,524   $456,106   $30,782   $14,308   $1,889,881 

 

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of September 30, 2014:

 

Risk
Grade
  Commercial,
financial &
agricultural
   Real estate -
construction &
development
   Real estate -
commercial &
farmland
   Real estate -
residential
   Consumer
installment loans
   Other   Total 
   (Dollars in Thousands) 
10  $114,298   $171   $251   $479   $6,287   $-   $121,486 
15   29,665    4,114    136,303    51,508    1,124    -    222,714 
20   110,337    50,427    478,551    241,457    17,700    9,583    908,055 
23   186    9,292    9,574    9,469    305    -    28,826 
25   73,251    83,245    217,226    105,635    4,842    -    484,199 
30   3,438    1,781    16,217    10,060    254    -    31,750 
40   3,608    5,285    23,950    17,907    890    -    51,640 
50   -    -    88    -    -    -    88 
60   -    -    -    -    1    -    1 
Total   $334,783   $154,315   $882,160   $436,515   $31,403   $9,583   $1,848,759 

 

 26 

 

 

The following table presents the purchased non-covered loan portfolio by risk grade as of September 30, 2015:

 

                             

Risk

Grade 

 

Commercial,
financial &
agricultural 

  

Real estate -
construction &
development

  

Real estate -
commercial &
farmland

  

Real estate -
residential

  

Consumer
installment loans

  

Other

  

Total

 
  

(Dollars in Thousands)

 
10  $8,741   $-   $-   $-   $1,060   $-   $9,801 
15   1,229    1,805    8,440    38,643    789    -    50,906 
20   10,982    13,518    187,329    133,914    2,291    -    348,034 
23   -    230    4,079    6,303    -    -    10,612 
25   17,873    48,137    159,816    63,049    1,397    -    290,272 
30   2,379    3,418    12,997    7,609    55    -    26,458 
40   1,116    4,001    12,371    13,794    99    -    31,381 
50   30    -    -    -    -    -    30 
60   -    -    -    -    -    -    - 
Total   $42,350   $71,109   $385,032   $263,312   $5,691   $-   $767,494 

 

The following table presents the purchased non-covered loan portfolio by risk grade as of December 31, 2014:

 

Risk

Grade

 

Commercial,
financial &
agricultural

  

Real estate -
construction &
development

  

Real estate -
commercial &
farmland

  

Real estate -
residential

  

Consumer
installment loans

  

Other

  

Total

 
  

(Dollars in Thousands)

 
10  $6,624   $-   $-   $290   $480   $-   $7,394 
15   1,376    552    13,277    14,051    501    -    29,727 
20   13,657    12,991    116,308    64,083    1,647    -    208,686 
23   73    -    3,207    3,298    -    -    6,578 
25   13,753    36,230    144,293    164,959    1,920    -    361,155 
30   1,618    4,365    12,279    7,444    41    -    25,747 
40   910    4,254    17,342    12,184    199    -    34,889 
50   30    -    -    33    -    -    63 
60   -    -    -    -    -    -    - 
Total   $38,041   $58,362   $306,706   $266,342   $4,788   $-   $674,239 

 

The following table presents the purchased non-covered loan portfolio by risk grade as of September 30, 2014:

 

Risk

Grade

 

Commercial,
financial &
agricultural

  

Real estate -
construction &
development

  

Real estate -
commercial &
farmland

  

Real estate -
residential

  

Consumer
installment loans

  

Other

  

Total

 
  

(Dollars in Thousands)

 
10  $3,187   $-   $-   $292   $486   $-   $3,965 
15   5,023    447    14,136    15,336    519    -    35,461 
20   11,230    12,345    90,915    64,178    2,034    -    180,702 
23   8    -    -    1,208    -    -    1,216 
25   16,467    38,426    167,458    175,313    2,065    -    399,729 
30   1,494    2,164    9,300    7,071    19    -    20,048 
40   668    6,880    14,981    9,915    121    -    32,565 
50   -    -    -    34    4    -    38 
60   -    -    -    -    -    -    - 
Total   $38,077   $60,262   $296,790   $273,347   $5,248   $-   $673,724 

 

 27 

 

 

The following table presents the covered loan portfolio by risk grade as of September 30, 2015:

 

Risk
Grade
  Commercial,
financial &
agricultural
   Real estate -
construction &
development
   Real estate -
commercial &
farmland
   Real estate -
residential
   Consumer
installment loans
   Other   Total 
   (Dollars in Thousands) 
10  $-   $-   $-   $-   $-   $-   $- 
15   -    -    478    115    -    -    593 
20   327    1,147    16,211    12,304    42    -    30,031 
23   53    -    4,783    6,396    -    -    11,232 
25   4,476    8,241    53,126    27,795    37    -    93,675 
30   4,060    1,965    5,539    5,481    -    -    17,045 
40   4,431    2,913    23,262    7,744    93    -    38,443 
50   -    -    -    -    -    -    - 
60   2    -    -    -    -    -    2 
Total   $13,349   $14,266   $103,399   $59,835   $172   $-   $191,021 

 

The following table presents the covered loan portfolio by risk grade as of December 31, 2014:

 

Risk
Grade
  Commercial,
financial &
agricultural
   Real estate -
construction &
development
   Real estate -
commercial &
farmland
   Real estate -
residential
   Consumer
installment loans
   Other   Total 
   (Dollars in Thousands) 
10  $-   $-   $-   $-   $-   $-   $- 
15   -    1    761    525    -    -    1,287 
20   917    3,184    23,167    14,089    77    -    41,434 
23   164    537    11,404    6,642    -    -    18,747 
25   5,181    9,406    80,334    33,124    37    -    128,082 
30   4,808    2,753    5,302    8,050    -    -    20,913 
40   10,397    7,566    26,659    16,090    104    -    60,816 
50   -    -    -    -    -    -    - 
60   -    -    -    -    -    -    - 
Total   $21,467   $23,447   $147,627   $78,520   $218   $-   $271,279 

 

The following table presents the covered loan portfolio by risk grade as of September 30, 2014:

 

Risk
Grade
  Commercial,
financial &
agricultural
   Real estate -
construction &
development
   Real estate -
commercial &
farmland
   Real estate -
residential
   Consumer
installment loans
   Other   Total 
   (Dollars in Thousands) 
10  $-   $-   $-   $-   $-   $-   $- 
15   -    2    795    531    -    -    1,328 
20   1,302    3,380    33,200    15,957    71    -    53,910 
23   145    547    14,640    5,815    -    -    21,147 
25   5,687    11,725    89,201    35,344    41    -    141,998 
30   4,827    3,006    8,808    8,649    43    -    25,333 
40   10,584    9,096    33,922    16,149    122    -    69,873 
50   -    -    -    -    -    -    - 
60   -    -    -    -    -    -    - 
Total   $22,545   $27,756   $180,566   $82,445   $277   $-   $313,589 

 

 28 

 

 

Troubled Debt Restructurings

 

The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company has exhibited the greatest success for rehabilitation of the loan by a reduction in the rate alone (maintaining the amortization of the debt) or a combination of a rate reduction and the forbearance of previously past due interest or principal. This has most typically been evidenced in certain commercial real estate loans whereby a disruption in the borrower’s cash flow resulted in an extended past due status, of which the borrower was unable to catch up completely as the cash flow of the property ultimately stabilized at a level lower than its original level. A reduction in rate, coupled with a forbearance of unpaid principal and/or interest, allowed the net cash flows to service the debt under the modified terms.

 

The Company’s policy requires a restructure request to be supported by a current, well-documented credit evaluation of the borrower’s financial condition and a collateral evaluation that is no older than six months from the date of the restructure. Key factors of that evaluation include the documentation of current, recurring cash flows, support provided by the guarantor(s) and the current valuation of the collateral. If the appraisal in the file is older than six months, an evaluation must be made as to the continued reasonableness of the valuation. For certain income-producing properties, current rent rolls and/or other income information can be utilized to support the appraisal valuation, when coupled with documented cap rates within our markets and a physical inspection of the collateral to validate the current condition.

 

The Company’s policy states that in the event a loan has been identified as a troubled debt restructuring, it should be assigned a grade of substandard and placed on nonaccrual status until such time the borrower has demonstrated the ability to service the loan payments based on the restructured terms – generally defined as six months of satisfactory payment history. Missed payments under the original loan terms are not considered under the new structure; however, subsequent missed payments are considered non-performance and are not considered toward the six month required term of satisfactory payment history. The Company’s loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest or (ii) it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and the prospects for full repayment, approved by the Company’s Chief Credit Officer.

 

In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in the first nine months of 2015 and 2014 totaling $77.4 million and $16.4 million, respectively, under such parameters.

 

As of September 30, 2015, December 31, 2014 and September 30, 2014, the Company had a balance of $13.9 million, $15.3 million and $20.5 million, respectively, in troubled debt restructurings, excluding purchased non-covered and covered loans. The Company has recorded $1.3 million, $2.2 million and $4.4 million in previous charge-offs on such loans at September 30, 2015, December 31, 2014 and September 30, 2014, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $183,000, $231,000 and $2.2 million at September 30, 2015, December 31, 2014 and September 30, 2014, respectively. At September 30, 2015, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

 

During the nine months ending September 30, 2015 and 2014, the Company modified loans as troubled debt restructurings, excluding purchased non-covered and covered loans, with principal balances of $4.3 million and $2.4 million, respectively, and these modifications did not have a material impact on the Company’s allowance for loan loss. The following table presents the loans by class modified as troubled debt restructurings, excluding purchased non-covered and covered loans, which occurred during the nine months ending September 30, 2015 and 2014:

 

   September 30, 2015   September 30, 2014 
Loan class:  #   Balance
(in thousands)
   #   Balance
(in thousands)
 
Commercial, financial & agricultural   4   $26    4   $62 
Real estate – construction & development   2    15    5    264 
Real estate – commercial & farmland   2    2,125    4    1,036 
Real estate – residential   28    2,089    14    985 
Consumer installment   13    47    13    50 
Total   49   $4,302    40   $2,397 

 

 29 

 

 

Troubled debt restructurings, excluding purchased non-covered and covered loans, with an outstanding balance of $2.6 million and $1.3 million defaulted during the nine months ended September 30, 2015 and 2014, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss. The following table presents the troubled debt restructurings by class that defaulted (defined as 30 days past due) during the nine months ending September 30, 2015 and 2014:

 

   September 30, 2015   September 30, 2014 
Loan class:  #   Balance
(in thousands)
   #   Balance
(in thousands)
 
Commercial, financial & agricultural   4   $18    -   $- 
Real estate – construction & development   2    34    1    33 
Real estate – commercial & farmland   5    1,011    1    65 
Real estate – residential   18    1,473    5    289 
Consumer installment   9    32    4    62 
Total   38   $2,568    11   $449 

 

The following table presents the amount of troubled debt restructurings by loan class, excluding purchased non-covered and covered loans, classified separately as accrual and non-accrual at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015  Accruing Loans   Non-Accruing Loans 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   4   $238    8   $68 
Real estate – construction & development   12    838    2    30 
Real estate – commercial & farmland   15    5,719    4    943 
Real estate – residential   51    5,209    16    759 
Consumer installment   15    71    18    64 
Total   97   $12,075    48   $1,864 

 

As of December 31, 2014  Accruing Loans   Non-Accruing Loans 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   6   $290    2   $13 
Real estate – construction & development   9    679    5    228 
Real estate – commercial & farmland   19    6,477    3    724 
Real estate – residential   47    5,258    11    1,485 
Consumer installment   11    55    11    73 
Total   92   $12,759    32   $2,523 

 

As of September 30, 2014  Accruing Loans   Non-Accruing Loans 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   4   $257    4   $507 
Real estate – construction & development   11    1,917    4    196 
Real estate – commercial & farmland   21    7,080    2    1,672 
Real estate – residential   43    7,973    10    759 
Consumer installment   9    34    12    93 
Total   88   $17,261    32   $3,227 

 

 30 

 

 

As of September 30, 2015, December 31, 2014 and September 30, 2014, the Company had a balance of $7.7 million, $1.2 million and $830,000, respectively, in troubled debt restructurings included in purchased non-covered loans. The Company has recorded $60,000 and $29,000 in previous charge-offs on such loans at September 30, 2015 and December 31, 2014, respectively. The Company had not recorded any previous charge-offs on such loans at September 30, 2014. At September 30, 2015, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

 

During the nine months ending September 30, 2015 and 2014, the Company modified purchased non-covered loans as troubled debt restructurings, with principal balances of $2.4 million and $830,000, respectively, and these modifications did not have a material impact on the Company’s allowance for loan loss. The Company transferred troubled debt restructurings with principal balances of $4.1 million from the covered loan category to the purchased non-covered loan category during the nine months ended September 30, 2015 due to the expiration of the loss-sharing agreements. The following table presents the purchased non-covered loans by class modified as troubled debt restructurings, which occurred during the nine months ending September 30, 2015 and 2014:

 

   September 30, 2015   September 30, 2014 
Loan class:  #   Balance
(in thousands)
   #   Balance
(in thousands)
 
Commercial, financial & agricultural   1   $1    -   $- 
Real estate – construction & development   2    30    1    305 
Real estate – commercial & farmland   3    622    -    - 
Real estate – residential   7    1,730    6    522 
Consumer installment   3    8    1    3 
Total   16   $2,391    8   $830 

 

Troubled debt restructurings included in purchased non-covered loans with an outstanding balance of $618,000 defaulted during the nine months ended September 30, 2015, and these defaults did not have a material impact on the Company’s allowance for loan loss. There were no troubled debt restructurings included in purchased non-covered loans that defaulted during the nine months ended September 30, 2014. The following table presents the troubled debt restructurings by class that defaulted (defined as 30 days past due) during the nine months ending September 30, 2015 and 2014:

 

   September 30, 2015   September 30, 2014 
Loan class:  #   Balance
(in thousands)
   #   Balance
(in thousands)
 
Commercial, financial & agricultural   -   $-    -   $- 
Real estate – construction & development   -    -    -    - 
Real estate – commercial & farmland   -    -    -    - 
Real estate – residential   2    618    -    - 
Consumer installment   -    -    -    - 
Total   2   $618    -   $- 

 

The following table presents the amount of troubled debt restructurings by loan class of purchased non-covered loans, classified separately as accrual and non-accrual at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015  Accruing Loans   Non-Accruing Loans 
Loan class:  #   Balance
(in thousands)
   #   Balance
(in thousands)
 
Commercial, financial & agricultural   -   $-    1   $1 
Real estate – construction & development   1    351    2    30 
Real estate – commercial & farmland   6    4,071    1    36 
Real estate – residential   13    2,761    3    397 
Consumer installment   2    5    2    3 
Total   22   $7,188    9   $467 

 

As of December 31, 2014  Accruing Loans   Non-Accruing Loans 
Loan class:  #   Balance
(in thousands)
   #   Balance
(in thousands)
 
Commercial, financial & agricultural   -   $-    -   $- 
Real estate – construction & development   1    317    -    - 
Real estate – commercial & farmland   1    346    -    - 
Real estate – residential   6    547    1    25 
Consumer installment   1    2    -    - 
Total   9   $1,212    1   $25 

 

 31 

 

 

As of September 30, 2014  Accruing Loans   Non-Accruing Loans 
Loan class:  #   Balance
(in thousands)
   #   Balance
(in thousands)
 
Commercial, financial & agricultural   -   $-    -   $- 
Real estate – construction & development   1    305    -    - 
Real estate – commercial & farmland   -    -    -    - 
Real estate – residential   4    275    2    247 
Consumer installment   1    3    -    - 
Total   6   $583    2   $247 

 

As of September 30, 2015, December 31, 2014 and September 30, 2014, the Company had a balance of $20.5 million, $24.6 million and $25.0 million, respectively, in troubled debt restructurings included in covered loans. The Company has recorded $1.4 million, $1.8 million and $2.1 million in previous charge-offs on such loans at September 30, 2015, December 31, 2014 and September 30, 2014, respectively. At September 30, 2015, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

 

During the nine months ending September 30, 2015 and 2014, the Company modified covered loans as troubled debt restructurings with principal balances of $2.5 million and $4.3 million, respectively, and these modifications did not have a material impact on the Company’s allowance for loan loss. The following table presents the covered loans by class modified as troubled debt restructurings, during the nine months ending September 30, 2015 and 2014:

 

   September 30, 2015   September 30, 2014 
Loan class:  #   Balance
(in thousands)
   #   Balance
(in thousands)
 
Commercial, financial & agricultural   1   $-    -   $- 
Real estate – construction & development   2    312    2    26 
Real estate – commercial & farmland   5    1,492    7    2,550 
Real estate – residential   12    679    26    1,677 
Consumer installment   -    -    -    - 
Total   20   $2,483    35   $4,253 

 

Troubled debt restructurings of covered loans with an outstanding balance of $1.3 million and $1.3 million defaulted during the nine months ended September 30, 2015 and 2014, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss. The following table presents the troubled debt restructurings by class that defaulted (defined as 30 days past due) during the nine months ending September 30, 2015 and 2014:

 

   September 30, 2015   September 30, 2014 
Loan class:  #   Balance
(in thousands)
   #   Balance
(in thousands)
 
Commercial, financial & agricultural   -   $-    -   $- 
Real estate – construction & development   -    -    1    14 
Real estate – commercial & farmland   3    177    2    227 
Real estate – residential   9    1,088    12    1,060 
Consumer installment   -    -    -    - 
Total   12   $1,265    15   $1,301 

 

 32 

 

 

 

The following table presents the amount of troubled debt restructurings by loan class of covered loans, classified separately as accrual and non-accrual at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015  Accruing Loans  Non-Accruing Loans 
Loan class:  # 

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural  1  $2    2   $- 
Real estate – construction & development  3   2,847    3    325 
Real estate – commercial & farmland  9   3,101    8    2,449 
Real estate – residential  96   10,625    17    1,167 
Consumer installment  1   1    -    - 
Total  110  $16,576    30   $3,941 

 

As of December 31, 2014  Accruing Loans  Non-Accruing Loans 
Loan class:  # 

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural  2  $40    2   $- 
Real estate – construction & development  4   3,037    2    29 
Real estate – commercial & farmland  14   8,079    5    1,082 
Real estate – residential  96   11,460    8    831 
Consumer installment  1   3    -    - 
Total  117  $22,619    17   $1,942 

 

As of September 30, 2014  Accruing Loans  Non-Accruing Loans 
Loan class:  # 

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural  1  $26    1   $3 
Real estate – construction & development  3   3,024    3    56 
Real estate – commercial & farmland  15   8,501    6    1,225 
Real estate – residential  94   11,202    13    965 
Consumer installment  1   4    -    - 
Total  114  $22,757    23   $2,249 

 

 33 

 

 

Allowance for Loan Losses

 

The allowance for loan losses represents an allowance for probable incurred losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on non-accruing, past due and other loans that management believes might be potentially impaired or warrant additional attention. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio. In addition, based on internal reviews and external reviews performed by regulatory authorities, the Company further segregates the loan portfolio by loan grades based on an assessment of risk for a particular loan or group of loans. Certain reviewed loans are assigned specific allowances when a review of relevant data determines that a general allocation is not sufficient or when the review affords management the opportunity to adjust the amount of exposure in a given credit. In establishing allowances, management considers historical loan loss experience but adjusts this data with a significant emphasis on current loan quality trends, current economic conditions and other factors in the markets where the Company operates. Factors considered include, among others, current valuations of real estate in the Company’s markets, unemployment rates, the effect of weather conditions on agricultural related entities and other significant local economic events.

 

The Company has developed a methodology for determining the adequacy of the allowance for loan losses which is monitored by the Company’s Chief Credit Officer. Procedures provide for the assignment of a risk rating for every loan included in the total loan portfolio, with the exception of certain mortgage loans serviced at a third party, mortgage warehouse lines and overdraft protection loans, which are treated as pools for risk-rating purposes. The risk rating schedule provides nine ratings of which five ratings are classified as pass ratings and four ratings are classified as criticized ratings. Each risk rating is assigned a percentage factor to be applied to the loan balance to determine the adequate amount of reserve. All relationships greater than $1.0 million and a sample of relationships greater than $250,000 are reviewed annually by the Bank’s independent internal loan review department. As a result of these loan reviews, certain loans may be identified as having deteriorating credit quality. Other loans that surface as problem loans may also be assigned specific reserves. Past due loans are assigned risk ratings based on the number of days past due. The calculation of the allowance for loan losses, including underlying data and assumptions, is reviewed regularly by the Company’s Chief Financial Officer and the independent internal loan review department.

 

Loan losses are charged against the allowance when management believes the collection of a loan’s principal is unlikely. Subsequent recoveries are credited to the allowance. Consumer loans are charged-off in accordance with the Federal Financial Institutions Examination Council’s (“FFIEC”) Uniform Retail Credit Classification and Account Management Policy. Commercial loans are charged-off when they are deemed uncollectible, which usually involves a triggering event within the collection effort. If the loan is collateral dependent, the loss is more easily identified and is charged-off when it is identified, usually based upon receipt of an appraisal. However, when a loan has guarantor support, the Company may carry the estimated loss as a reserve against the loan while collection efforts with the guarantor are pursued. If, after collection efforts with the guarantor are complete, the deficiency is still considered uncollectible, the loss is charged-off and any further collections are treated as recoveries. In all situations, when a loan is downgraded to an Asset Quality Rating of 60 (Loss per the regulatory guidance), the uncollectible portion is charged-off.

 

 34 

 

 

The following table details activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2015, the year ended December 31, 2014 and the three and nine months ended September 30, 2014. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

 

   Commercial,
financial &
agricultural
   Real estate –
construction &
development
   Real estate –
commercial &
farmland
   Real estate -
residential
   Consumer
installment
loans and
Other
   Purchased
non-covered
loans,
including
pools
   Covered
loans
   Total 
   (Dollars in Thousands) 
Three months ended September 30, 2015:                                        
Balance, June 30, 2015  $1,426   $5,365   $8,381   $4,805   $1,681   $-   $-   $21,658 
Provision for loan losses   110    643    43    1,238    (1,386)   531    (193)   986 
Loans charged off   (135)   (105)   (184)   (234)   (61)   (302)   (246)   (1,267)
Recoveries of loans previously charged off   117    6    272    54    33    173    439    1,094 
Balance, September 30, 2015  $1,518   $5,909   $8,512   $5,863   $267   $402   $-   $22,471 
                                         
Nine months ended September 30, 2015:                                        
Balance, January 1, 2015  $2,004   $5,030   $8,823   $4,129   $1,171   $-   $-   $21,157 
Provision for loan losses   (66)   1,030    743    2,562    (721)   219    944    4,711 
Loans charged off   (937)   (465)   (1,358)   (966)   (300)   (772)   (1,661)   (6,459)
Recoveries of loans previously charged off   517    314    304    138    117    955    717    3,062 
Balance, September 30, 2015  $1,518   $5,909   $8,512   $5,863   $267   $402   $-   $22,471 
                                         
Period-end amount allocated to:                                        
Loans individually evaluated for impairment  $521   $708   $1,622   $1,848   $-   $-   $-   $4,699 
Loans collectively evaluated for impairment   997    5,201    6,890    4,015    267    -    -    17,370 
Loan pools collectively evaluated for impairment   -    -    -    -    -    402    -    402 
Ending balance  $1,518   $5,909   $8,512   $5,863   $267   $402   $-   $22,471 
                                         
Loans:                                        
Individually evaluated for impairment  $1,286   $1,820   $13,306   $8,415   $-   $-   $-   $24,827 
Collectively evaluated for impairment   426,461    218,978    1,054,522    523,870    41,991    668,614    83,974    3,018,410 
Acquired with deteriorated credit quality   -    -    -    -    -    98,880    107,047    205,927 
Loan pools collectively evaluated   for impairment   -    -    -    -    -    410,072    -    410,072 
Ending balance  $427,747   $220,798   $1,067,828   $532,285   $41,991   $1,177,566   $191,021   $3,659,236 

 

 35 

 

 

   Commercial,
financial &
agricultural
   Real estate –
construction &
development
   Real estate –
commercial &
farmland
   Real estate -
residential
   Consumer
installment
loans and
Other
   Purchased
non-covered
loans,
including
pools
   Covered
loans
   Total 
   (Dollars in Thousands) 
                             
Three months ended December 31, 2014:                                        
Balance, September 30, 2014  $2,581   $5,294   $8,632   $5,407   $298   $-   $-   $22,212 
Provision for loan losses   (200)   (239)   1,133    (981)   937    80    158    888 
Loans charged off   (468)   (74)   (1,033)   (368)   (128)   (80)   (337)   (2,488)
Recoveries of loans previously charged off   91    49    91    71    64    -    179    545 
Balance, December 31, 2014  $2,004   $5,030   $8,823   $4,129   $1,171   $-   $-   $21,157 
                                         
Twelve months ended December 31, 2014:                                        
Balance, January 1, 2014  $1,823   $5,538   $8,393   $6,034   $589   $-   $-   $22,377 
Provision for loan losses   1,427    (265)   3,444    (452)   567    84    843    5,648 
Loans charged off   (1,567)   (592)   (3,288)   (1,707)   (471)   (84)   (1,851)   (9,560)
Recoveries of loans previously charged off   321    349    274    254    486    -    1,008    2,692 
Balance, December 31, 2014  $2,004   $5,030   $8,823   $4,129   $1,171   $-   $-   $21,157 
                                         
Period-end amount allocated to:                                        
Loans individually evaluated for impairment  $375   $743   $1,861   $911   $-   $-   $-   $3,890 
Loans collectively evaluated for impairment   1,629    4,287    6,962    3,218    1,171    -    -    17,267 
Ending balance  $2,004   $5,030   $8,823   $4,129   $1,171   $-   $-   $21,157 
                                         
Loans:                                        
Individually evaluated for impairment  $490   $3,709   $14,546   $8,904   $-   $-   $-   $27,649 
Collectively evaluated for impairment   319,164    157,798    892,978    447,202    45,090    579,172    122,248    2,563,652 
Acquired with deteriorated credit quality   -    -    -    -    -    95,067    149,031    244,098 
Ending balance  $319,654   $161,507   $907,524   $456,106   $45,090   $674,239   $271,279   $2,835,399 

 

 36 

 

 

   Commercial,
financial &
agricultural
   Real estate –
construction &
development
   Real estate –
commercial &
farmland
   Real estate -
residential
   Consumer
installment
loans and
Other
   Purchased
non-covered
loans,
including
pools
   Covered
loans
   Total 
   (Dollars in Thousands) 
                             
Three months ended September 30, 2014:                                        
Balance, June 30, 2014  $2,185   $5,431   $8,317   $5,166   $1,155   $-   $-   $22,254 
Provision for loan losses   540    63    1,237    595    (862)   4    92    1,669 
Loans charged off   (191)   (296)   (953)   (406)   (129)   (4)   (376)   (2,355)
Recoveries of loans previously charged off   47    96    31    52    134    -    284    644 
Balance, September 30, 2014  $2,581   $5,294   $8,632   $5,407   $298   $-   $-   $22,212 
                                         
Nine months ended September 30, 2014:                                        
Balance, January 1, 2014  $1,823   $5,538   $8,393   $6,034   $589   $-   $-   $22,377 
Provision for loan losses   1,627    (26)   2,311    529    (370)   4    685    4,760 
Loans charged off   (1,099)   (518)   (2,255)   (1,339)   (343)   (4)   (1,514)   (7,072)
Recoveries of loans previously charged off   230    300    183    183    422    -    829    2,147 
Balance, September 30, 2014  $2,581   $5,294   $8,632   $5,407   $298   $-   $-   $22,212 
                                         
Period-end amount allocated to:                                        
Loans individually evaluated for impairment  $611   $540   $1,682   $1,272   $-   $-   $-   $4,105 
Loans collectively evaluated for impairment   1,970    4,754    6,950    4,135    298    -    -    18,107 
Ending balance  $2,581   $5,294   $8,632   $5,407   $298   $-   $-   $22,212 
                                         
Loans:                                        
Individually evaluated for impairment  $1,549   $3,078   $17,129   $11,860   $-   $-   $-   $33,616 
Collectively evaluated for impairment   333,234    151,237    865,031    424,655    40,986    581,723    142,128    2,538,994 
Acquired with deteriorated credit quality   -    -    -    -    -    92,001    171,461    263,462 
Ending balance  $334,783   $154,315   $882,160   $436,515   $40,986   $673,724   $313,589   $2,836,072 

 

 37 

 

 

NOTE 6 – ASSETS ACQUIRED IN FDIC-ASSISTED ACQUISITIONS

From October 2009 through July 2012, the Company participated in ten FDIC-assisted acquisitions whereby the Company purchased certain failed institutions out of the FDIC’s receivership. These institutions include the following:

 

Bank Acquired  Location:  Branches:  Date Acquired
American United Bank (“AUB”)  Lawrenceville, Ga.  1  October 23, 2009
United Security Bank (“USB”)  Sparta, Ga.  2  November 6, 2009
Satilla Community Bank (“SCB”)  St. Marys, Ga.  1  May 14, 2010
First Bank of Jacksonville (“FBJ”)  Jacksonville, Fl.  2  October 22, 2010
Tifton Banking Company (“TBC”)  Tifton, Ga.  1  November 12, 2010
Darby Bank & Trust (“DBT”)  Vidalia, Ga.  7  November 12, 2010
High Trust Bank (“HTB”)  Stockbridge, Ga.  2  July 15, 2011
One Georgia Bank (“OGB”)  Midtown Atlanta, Ga.  1  July 15, 2011
Central Bank of Georgia (“CBG”)  Ellaville, Ga.  5  February 24, 2012
Montgomery Bank & Trust (“MBT”)  Ailey, Ga.  2  July 6, 2012

 

The determination of the initial fair values of loans at the acquisition date and the initial fair values of the related FDIC indemnification assets involves a high degree of judgment and complexity. The carrying values of the acquired loans and the FDIC indemnification assets reflect management’s best estimate of the fair value of each of these assets as of the date of acquisition. However, the amount that the Company realizes on these assets could differ materially from the carrying values reflected in the financial statements included in this report, based upon the timing and amount of collections on the acquired loans in future periods. Because of the loss-sharing agreements with the FDIC on these assets, the Company does not expect to incur any significant losses. The Company’s FDIC-assisted acquisition of MBT did not include a loss-sharing agreement. To the extent the actual values realized for the acquired loans are different from the estimates, the indemnification assets will generally be affected in an offsetting manner due to the loss-sharing support from the FDIC.

 

FASB ASC 310 – 30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310”), applies to a loan with evidence of deterioration of credit quality since origination, acquired by completion of a transfer for which it is probable, at acquisition, that the investor will be unable to collect all contractually required payments receivable. ASC 310 prohibits carrying over or creating an allowance for loan losses upon initial recognition for loans which fall under the scope of this statement. At the acquisition dates, a majority of these loans were valued based on the liquidation value of the underlying collateral because the future cash flows are primarily based on the liquidation of underlying collateral. There was no allowance for credit losses established related to these ASC 310 loans at the acquisition dates, based on the provisions of this statement. Over the life of the acquired loans, the Company continues to estimate cash flows expected to be collected. If the expected cash flows expected to be collected increases, then the Company adjusts the amount of accretable discount recognized on a prospective basis over the loan’s remaining life. If the expected cash flows expected to be collected decreases, then the Company records a provision for loan loss in its consolidated statement of operations.

 

At September 30, 2015, the Company’s FDIC loss-sharing receivable totaled $4.5 million, which is comprised of $10.7 million in indemnification asset (for reimbursements associated with anticipated losses in future quarters) and $1.5 million in current charge-offs and expenses already incurred but not yet submitted for reimbursement, less the accrued clawback liability of $7.7 million.

 

 38 

 

 

The following table summarizes components of all covered assets at September 30, 2015, December 31, 2014 and September 30, 2014 and their origin:

 

   Covered loans  

Less: Fair

value

adjustments

  

Total

covered

loans

   OREO  

Less: Fair

value

adjustments

  

Total

covered

OREO

  

Total

covered

assets

  

FDIC

indemnification

asset (clawback

liability), net

 
As of September 30, 2015:                                
   (Dollars in Thousands) 
AUB  $-   $-   $-   $-   $-   $-   $-   $115 
                                         
USB   3,686    17    3,669    165    -    165    3,834    (1,453)
                                         
SCB   5,269    174    5,095    -    -    -    5,095    280 
                                         
FBJ   13,826    991    12,835    984    171    813    13,648    679 
                                         
DBT   44,112    3,107    41,005    5,044    624    4,420    45,425    (1,737)
                                         
TBC   16,813    481    16,332    1,480    116    1,364    17,696    (2,225)
                                         
HTB   45,345    3,999    41,346    2,985    955    2,030    43,376    4,108 
                                         
OGB   28,309    1,971    26,338    320    39    281    26,619    1,517 
                                         
CBG   48,397    3,996    44,401    3,474    344    3,130    47,531    3,222 
                                         
Total  $205,757   $14,736   $191,021   $14,452   $2,249   $12,203   $203,224   $4,506 

 

   Covered loans  

Less: Fair

value

adjustments

  

Total

covered

loans

   OREO  

Less: Fair

value

adjustments

  

Total

covered

OREO

  

Total

covered

assets

  

FDIC

indemnification

asset (clawback

liability), net

 
As of December 31, 2014:                                
   (Dollars in Thousands) 
AUB  $-   $-   $-   $-   $-   $-   $-   $188 
                                         
USB   4,350    150    4,200    165    -    165    4,365    (1,197)
                                         
SCB   26,686    602    26,084    2,849    389    2,460    28,544    1,828 
                                         
FBJ   21,243    1,825    19,418    632    -    632    20,050    1,885 
                                         
DBT   64,338    6,437    57,901    6,655    514    6,141    64,042    6,860 
                                         
TBC   23,487    1,117    22,370    2,388    367    2,021    24,391    3,287 
                                         
HTB   52,699    5,120    47,579    3,670    1,283    2,387    49,966    6,459 
                                         
OGB   42,971    3,785    39,186    2,244    39    2,205    41,391    3,906 
                                         
CBG   60,950    6,409    54,541    4,805    909    3,896    58,437    8,135 
                                         
Total  $296,724   $25,445   $271,279   $23,408   $3,501   $19,907   $291,186   $31,351 

 

 39 

 

 

   Covered loans  

Less: Fair

value

adjustments

  

Total

covered

loans

   OREO  

Less: Fair

value

adjustments

  

Total

covered

OREO

  

Total

covered

assets

  

FDIC

indemnification

asset (clawback

liability), net

 
As of September 30, 2014:                                
   (Dollars in Thousands) 
AUB  $8,902   $-   $8.902   $666   $-   $666   $9,568   $882 
                                         
USB   13,576    351    13,225    2,134    48    2,086    15,311    (439)
                                         
SCB   28,534    789    27,745    2,665    308    2,357    30,102    1,855 
                                         
FBJ   22,421    2,346    20,075    1,578    90    1,488    21,563    2,138 
                                         
DBT   75,683    8,531    67,152    9,804    1,024    8,780    75,932    9,337 
                                         
TBC   25,577    1,465    24,112    3,552    394    3,158    27,270    2,542 
                                         
HTB   54,317    5,761    48,556    3,477    1,239    2,238    50,794    7,152 
                                         
OGB   48,889    4,160    44,729    2,244    39    2,205    46,934    5,803 
                                         
CBG   67,273    8,180    59,093    7,195    1,290    5,905    64,998    8,963 
                                         
Total  $345,172   $31,583   $313,589   $33,315   $4,432   $28,883   $342,472   $38,233 

 

A rollforward of acquired covered loans for the nine months ended September 30, 2015, the year ended December 31, 2014 and the nine months ended September 30, 2014 is shown below:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Balance, January 1  $271,279   $390,237   $390,237 
Charge-offs   (5,062)   (9,255)   (7,570)
Accretion   8,105    22,188    20,822 
Transfer to covered other real estate owned   (6,909)   (13,650)   (10,840)
Transfer to purchased, non-covered loans due to loss-share expiration   (15,462)   (15,475)   - 
Payments received   (59,930)   (102,996)   (79,060)
Other   -    230    - 
Ending balance  $191,021   $271,279   $313,589 

 

The following is a summary of changes in the accretable discounts of acquired covered loans during the nine months ended September 30, 2015, the year ended December 31, 2014 and the nine months ended September 30, 2014:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Balance, January 1  $15,578   $25,493   $25,493 
Accretion   (8,105)   (22,188)   (20,822)
Transfer to purchased, non-covered loans due to loss-share expiration   (84)   -    - 
Transfers between non-accretable and accretable discounts, net   3,312    12,273    16,070 
Ending balance  $10,701   $15,578   $20,741 

 

 40 

 

The shared-loss agreements are subject to the servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the shared-loss agreements were recorded as an indemnification asset at their estimated fair values on the acquisition dates. As of September 30, 2015, December 31, 2014 and September 30, 2014, the Company has recorded a clawback liability of $7.7 million, $6.2 million and $5.9 million, respectively, which represents the obligation of the Company to reimburse the FDIC should actual losses be less than certain thresholds established in each loss-share agreement. Changes in the FDIC shared-loss receivable for the nine months ended September 30, 2015, for the year ended December 31, 2014 and for the nine months ended September 30, 2014 are as follows:

 

(Dollars in Thousands)

 

September 30,
2015

  

December 31,
2014

  

September 30,
2014

 
Beginning balance, January 1  $31,351   $65,441   $65,441 
Payments received from FDIC    (19,089)   (22,494)   (18,509)
Accretion (amortization)    (7,914)   (18,449)   (14,760)
Changes in clawback liability    (1,483)   (1,222)   (857)
Increase in receivable due to:                
    Charge-offs on covered loans    1,180    3,372    2,736 
    Write downs of covered other real estate    2,349    4,771    2,372 
    Reimbursable expenses on covered assets    2,312    1,078    3,410 
Other activity, net    (4,200)   (1,146)   (1,600)
Ending balance   $4,506   $31,351   $38,233 

 

NOTE 7. OTHER REAL ESTATE OWNED

 

The following is a summary of the activity in other real estate owned during the nine months ended September 30, 2015, the year ended December 31, 2014 and the nine months ended September 30, 2014:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Beginning balance, January 1  $33,160   $33,351   $33,351 
Loans transferred to other real estate owned    9,838    11,972    9,268 
Net gains (losses) on sale and write-downs    (9,583)   (4,585)   (2,164)
Sales proceeds    (12,685)   (7,578)   (5,135)
Ending balance   $20,730   $33,160   $35,320 

 

The following is a summary of the activity in purchased, non-covered other real estate owned during the nine months ended September 30, 2015, the year ended December 31, 2014 and the nine months ended September 30, 2014:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Beginning balance, January 1  $15,585   $4,276   $4,276 
Loans transferred to other real estate owned    2,565    4,160    1,955 
Acquired in acquisitions    2,189    8,864    8,864 
Transfer from covered other real estate owned due to loss-share expiration    75    1,226    - 
Net gains (losses) on sale and write-downs    326    828    404 
Sales proceeds    (9,202)   (3,769)   (1,839)
Ending balance   $11,538   $15,585   $13,660 

 

The following is a summary of the activity in covered other real estate owned during the nine months ended September 30, 2015, the year ended December 31, 2014 and the nine months ended September 30, 2014:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Beginning balance, January 1  $19,907   $45,893   $45,893 
Loans transferred to other real estate owned    6,909    13,650    10,839 
Transfer from covered other real estate owned due to loss-share expiration    (75)   (1,226)   - 
Net gains (losses) on sale and write-downs    (2,936)   (5,965)   (2,909)
Sales proceeds    (11,602)   (32,445)   (24,940)
Ending balance   $12,203   $19,907   $28,883 

 

 41 

 

 

NOTE 8 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

 

The Company classifies the sales of securities under agreements to repurchase as short-term borrowings. The amounts received under these agreements are reflected as a liability in the Company’s consolidated balance sheets and the securities underlying these agreements are included in investment securities in the Company’s consolidated balance sheets. At September 30, 2015, December 31, 2014 and September 30, 2014, all securities sold under agreements to repurchase mature on a daily basis. The market value of the securities fluctuate on a daily basis due to market conditions. The Company monitors the market value of the securities underlying these agreements on a daily basis and is required to transfer additional securities if the market value of the securities fall below the repurchase agreement price. The Company maintains an unpledged securities portfolio that it believes is sufficient to protect against a decline in the market value of the securities sold under agreements to repurchase.

 

The following is a summary of the Company’s securities sold under agreements to repurchase at September 30, 2015, December 31, 2014 and September 30, 2014:

 

(Dollars in Thousands) 

September 30,
2015

  

December 31,
2014

  

September 30,
2014

 
Securities sold under agreements to repurchase  $51,506   $73,310   $32,351 
Total  $51,506   $73,310   $32,351 

 

At September 30, 2015, December 31, 2014 and September 30, 2014, the investment securities underlying these agreements were all mortgage-backed securities.

 

NOTE 9 – OTHER BORROWINGS

 

The Company has, from time to time, utilized certain borrowing arrangements with various financial institutions to fund growth in earning assets or provide additional liquidity when appropriate spreads can be realized. At September 30, 2015, December 31, 2014 and September 30, 2014, there were $39.0 million, $78.9 million and $147.4 million, respectively, outstanding borrowings with the Company’s correspondent banks. Other borrowings consist of the following:

 

(Dollars in Thousands) 

September 30,
2015

  

December 31,
2014

  

September 30,
2014

 
Daily Rate Credit from Federal Home Loan Bank with a fixed interest rate of 0.36%  $-   $35,000   $75,000 
Advance from Federal Home Loan Bank with a fixed interest rate of 0.16%, due October 24, 2014   -    -    25,000 
Advances under revolving credit agreement with a regional bank with interest at 90-day LIBOR plus 3.50% (3.78% at September 30, 2015 and 3.73% at December 31, 2014 and September 30, 2014) due in August 2016, secured by subsidiary bank stock   24,000    24,000    22,500 
Advance from correspondent bank with a fixed interest rate of 4.50%, due November 27, 2017, secured by subsidiary bank loan receivable   -    4,881    4,909 
Subordinated debt issued by Prosperity Bank due June 2016 with an interest rate of 90-day LIBOR plus 1.60% (1.83% at September 30, 2014)   -    -    5,000 
Subordinated debt issued by The Prosperity Banking Company due September  2016 with an interest rate of 90-day LIBOR plus 1.75% (2.09% at September 30, 2015, 1.99% at December 31, 2014 and 1.98% at September 30, 2014)   15,000    15,000    15,000 
Total  $39,000   $78,881   $147,409 

 

The advances from the Federal Home Loan Bank (“FHLB”) are collateralized by a blanket lien on all first mortgage loans and other specific loans in addition to FHLB stock. At September 30, 2015, $302.1 million was available for borrowing on lines with the FHLB.

 

As of September 30, 2015, the Company maintained credit arrangements with various financial institutions to purchase federal funds up to $65 million. The Company also participates in the Federal Reserve discount window borrowings. At September 30, 2015, the Company had $675.5 million of loans pledged at the Federal Reserve discount window and had $468.2 million available for borrowing.

 

 42 

 

 

NOTE 10 – COMMITMENTS AND CONTINGENCIES

 

Loan Commitments

 

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. They involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the balance sheets.

 

The Company’s exposure to credit loss is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. A summary of the Company’s commitments is as follows:

 

(Dollars in Thousands) 

September 30,
2015

  

December 31,
2014

  

September 30,
2014

 
             
Commitments to extend credit   $500,631   $293,517   $284,202 
                
Unused lines of credit   $53,465   $49,567   $48,606 
                
Financial standby letters of credit   $11,929   $9,683   $9,168 
                
Mortgage interest rate lock commitments   $79,635   $38,868   $53,790 

 

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer.

 

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Collateral is required in instances which the Company deems necessary.

 

Contingencies

 

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

 

A former borrower of the Company has filed a claim related to a loan previously made by the Company asserting lender liability.  The case was tried without a jury and an order was issued by the court against the Company awarding the borrower approximately $2.9 million on August 8, 2013.  The order is currently on appeal to the South Carolina Court of Appeals and the Company is asserting it had no fiduciary responsibility to the borrower.  As of September 30, 2015, the Company believes that it has valid bases in law and fact to overturn on appeal the verdict. As a result, the Company believes that the likelihood that the amount of the judgment will be affirmed is not probable, and, accordingly, that the amount of any loss cannot be reasonably estimated at this time. Because the Company believes that this potential loss is not probable or estimable, it has not recorded any reserves or contingencies related to this legal matter. In the event that the Company's assumptions used to evaluate this matter as neither probable nor estimable change in future periods, it may be required to record a liability for an adverse outcome.

 

 43 

 

 

NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME

 

Accumulated other comprehensive income for the Company consists of changes in net unrealized gains and losses on investment securities available for sale and interest rate swap derivatives. The following tables present a summary of the accumulated other comprehensive income balances, net of tax, as of September 30, 2015 and 2014:

 

 

(Dollars in Thousands) 

Unrealized Gain (Loss)
on Derivatives

  

Unrealized Gain (Loss)
on Securities

  

Accumulated Other
Comprehensive Income
(Loss)

 
Balance, January 1, 2015  $508   $5,590   $6,098 
Reclassification for gains included in net income   -    (89)   (89)
Current year changes   (669)   (1,143)   (1,812)
Balance, September 30, 2015  $(161)  $4,358   $4,197 

 

(Dollars in Thousands) 

Unrealized Gain (Loss)
on Derivatives

 
  

Unrealized Gain (Loss)
on Securities

 
  

Accumulated Other
Comprehensive Income
(Loss)

 
 
Balance, January 1, 2014  $1,397   $(1,691)  $(294)
Reclassification for gains included in net income   -    (90)   (90)
Current year changes   (489)   4,847    4,358 
Balance, September 30, 2014  $908   $3,066   $3,974 

 

NOTE 12 – WEIGHTED AVERAGE SHARES OUTSTANDING

Earnings per share have been computed based on the following weighted average number of common shares outstanding:

 

  

For the Three Months
Ended September 30,

  

For the Nine Months
Ended September 30,

 
   2015    2014   2015    2014 
  

(Share Data in
Thousands)

  

(Share Data in
Thousands)

 
Basic shares outstanding    32,195    26,773    31,614    25,705 
Plus: Dilutive effect of ISOs    126    111    118    116 
Plus: Dilutive effect of Restricted grants    232    277    230    278 
Diluted shares outstanding    32,553    27,161    31,962    26,099 

 

For the three-and nine-month periods ended September 30, 2015, there were no potential common shares with strike prices that would cause them to be anti-dilutive. For the three-and nine-month periods ended September 30, 2014, the Company has excluded 112,000 and 110,000, respectively, potential common shares with strike prices that would cause them to be anti-dilutive.

 

 44 

 

 

 

NOTE 13 – FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair value is based on discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The accounting standard for disclosures about the fair value of financial instruments excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

 

The Company has elected to record mortgage loans held-for-sale at fair value in order to eliminate the complexities and inherent difficulties of achieving hedge accounting and to better align reported results with the underlying economic changes in value of the loans and related hedge instruments. This election impacts the timing and recognition of origination fees and costs, as well as servicing value, which are now recognized in earnings at the time of origination. Interest income on mortgage loans held-for-sale is recorded on an accrual basis in the consolidated statement of earnings and comprehensive income under the heading “Interest income – interest and fees on loans”. The servicing value is included in the fair value of the interest rate lock commitments (“IRLCs”) with borrowers. The mark to market adjustments related to loans held-for-sale and the associated economic hedges are captured in mortgage banking activities. Net gains of $3.3 million and $3.2 million resulting from fair value changes of these mortgage loans were recorded in income during the nine months ended September 30, 2015 and 2014, respectively. The amount does not reflect changes in fair values of related derivative instruments used to hedge exposure to market-related risks associated with these mortgage loans. The change in fair value of both mortgage loans held for sale and the related derivative instruments are recorded in “Mortgage banking activity” in the Consolidated Statements of Earnings and Comprehensive Income. The Company’s valuation of mortgage loans held for sale incorporates an assumption for credit risk; however, given the short-term period that the Company holds these loans, valuation adjustments attributable to instrument-specific credit risk is nominal.

 

The following table summarizes the difference between the fair value and the principal balance for mortgage loans held for sale measured at fair value as of September 30, 2015, December 31, 2014 and September 30, 2014:

 

   September 30,
2015
   December 31,
2014
   September 30,
2014
 
   (Dollars in Thousands) 
Aggregate Fair Value of Mortgage Loans held for sale  $111,807   $94,759   $110,059 
                
Aggregate Unpaid Principal Balance  $108,179   $90,418   $105,882 
                
Past due loans of 90 days or more  $-   $-   $- 
                
Nonaccrual loans  $-   $-   $- 

 

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale and derivatives are recorded at fair value on a recurring basis. From time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans and OREO. Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments.

 

Fair Value Hierarchy

 

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

 

Level 1 - Quoted prices in active markets for identical assets or liabilities.

 

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

 45 

 

 

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

 

Cash and Due From Banks, Federal Funds Sold and Interest-Bearing Accounts: The carrying amount of cash and due from banks, federal funds sold and interest-bearing accounts approximates fair value.

 

Investment Securities Available for Sale: The fair value of securities available for sale is determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Level 2 securities include mortgage-backed securities issued by government-sponsored enterprises and municipal bonds. The Level 2 fair value pricing is provided by an independent third-party and is based upon similar securities in an active market. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and include certain residual municipal securities and other less liquid securities.

 

Other Investments: FHLB stock is included in other investments at its original cost basis. It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

 

Mortgage Loans Held for Sale: The Company records mortgage loans held for sale at fair value. The fair value of mortgage loans held for sale is determined on outstanding commitments from third party investors in the secondary markets and is classified within Level 2 of the valuation hierarchy.

 

Loans: The carrying amount of variable-rate loans that reprice frequently and have no significant change in credit risk approximates fair value. The fair value of fixed-rate loans is estimated based on discounted contractual cash flows, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The fair value of impaired loans is estimated based on discounted contractual cash flows or underlying collateral values, where applicable. A loan is determined to be impaired if the Company believes it is probable that all principal and interest amounts due according to the terms of the note will not be collected as scheduled. The fair value of impaired loans is determined in accordance with ASC 310-10, Accounting by Creditors for Impairment of a Loan, and generally results in a specific reserve established through a charge to the provision for loan losses. Losses on impaired loans are charged to the allowance when management believes the uncollectability of a loan is confirmed. Management has determined that the majority of impaired loans are Level 3 assets due to the extensive use of market appraisals.

 

Other Real Estate Owned: The fair value of other real estate owned (“OREO”) is determined using certified appraisals, internal evaluations and broker price opinions that value the property at its highest and best uses by applying traditional valuation methods common to the industry. The Company does not hold any OREO for profit purposes and all other real estate is actively marketed for sale. In most cases, management has determined that additional write-downs are required beyond what is calculable from the appraisal to carry the property at levels that would attract buyers. Because this additional write-down is not based on observable inputs, management has determined that other real estate owned should be classified as Level 3.

 

Covered Other Real Estate Owned: Covered other real estate owned includes other real estate owned on which the majority of losses would be covered by loss-sharing agreements with the FDIC. Management initially valued these assets at fair value using mostly unobservable inputs and, as such, has classified these assets as Level 3.

 

FDIC Loss-Share Receivable: Because the FDIC will reimburse the Company for certain acquired loans should the Company experience a loss, an indemnification asset is recorded at fair value at the acquisition date. The indemnification asset is recognized at the same time as the indemnified loans, and measured on the same basis, subject to collectability or contractual limitations. The shared loss agreements on the acquisition date reflect the reimbursements expected to be received from the FDIC, using an appropriate discount rate, which reflects counterparty credit risk and other uncertainties. The shared loss agreements continue to be measured on the same basis as the related indemnified loans, and the loss-share receivable is impacted by changes in estimated cash flows associated with these loans.

 

Accrued Interest Receivable/Payable: The carrying amount of accrued interest receivable and accrued interest payable approximates fair value.

 

Deposits: The carrying amount of demand deposits, savings deposits and variable-rate certificates of deposit approximates fair value. The fair value of fixed-rate certificates of deposit is estimated based on discounted contractual cash flows using interest rates currently offered for certificates with similar maturities.

 

 46 

 

 

Securities Sold under Agreements to Repurchase and Other Borrowings: The carrying amount of variable rate borrowings and securities sold under repurchase agreements approximates fair value and are classified as Level 1. The fair value of fixed rate other borrowings is estimated based on discounted contractual cash flows using the current incremental borrowing rates for similar borrowing arrangements and are classified as Level 2.

 

Subordinated Deferrable Interest Debentures: The fair value of the Company’s variable rate trust preferred securities is based primarily upon discounted cash flows using rates for securities with similar terms and remaining maturities and are classified as Level 2.

 

Off-Balance-Sheet Instruments: Because commitments to extend credit and standby letters of credit are typically made using variable rates and have short maturities, the carrying value and fair value are immaterial for disclosure.

 

Derivatives: The Company has entered into derivative financial instruments to manage interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair value of the derivatives is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves derived from observable market interest rate curves).

 

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting any applicable credit enhancements such as collateral postings, thresholds, mutual puts and guarantees.

 

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself or the counterparty. However, as of September 30, 2015, December 31, 2014 and September 30, 2014, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustment is not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.

 

 47 

 

 

The following table presents the fair value measurements of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of September 30, 2015, December 31, 2014 and September 30, 2014 (dollars in thousands):

 

   Fair Value Measurements on a Recurring Basis
As of September 30, 2015
 
   Fair Value   Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs
(Level 3)
 
                 
U.S. government agencies  $14,968   $-   $14,968   $- 
State, county and municipal securities   164,865    -    164,865    - 
Corporate debt securities   6,032    -    3,532    2,500 
Mortgage-backed securities   625,520    -    625,520    - 
Mortgage loans held for sale   111,807    -    111,807    - 
Mortgage banking derivative instruments   3,025    -    3,025    - 
Total recurring assets at fair value  $926,217   $-   $923,717   $2,500 
                     
Derivative financial instruments  $2,028   $-   $2,028   $- 
Total recurring liabilities at fair value  $2,028   $-   $2,028   $- 

 

   Fair Value Measurements on a Recurring Basis
As of December 31, 2014
 
   Fair Value   Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs
(Level 3)
 
                 
U.S. government agencies  $14,678   $-   $14,678   $- 
State, county and municipal securities   141,375    -    141,375    - 
Corporate debt securities   11,040    -    8,540    2,500 
Mortgage-backed securities   374,712    8,248    366,464    - 
Mortgage loans held for sale   94,759    -    94,759    - 
Mortgage banking derivative instruments   1,757    -    1,757    - 
Total recurring assets at fair value  $638,321   $8,248   $627,573   $2,500 
                     
Derivative financial instruments  $1,315   $-   $1,315   $- 
Mortgage banking derivative instruments   249    -    249    - 
Total recurring liabilities at fair value  $1,564   $-   $1,564   $- 

 

   Fair Value Measurements on a Recurring Basis
As of September 30, 2014
 
   Fair Value   Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs
(Level 3)
 
                 
U.S. government agencies  $14,460   $-   $14,460   $- 
State, county and municipal securities   137,635    -    137,635    - 
Corporate debt securities   10,965    -    8,465    2,500 
Mortgage-backed securities   366,449    10,273    356,176    - 
Mortgage loans held for sale   110,059    -    110,059    - 
Mortgage banking derivative instruments   2,295    -    2,295    - 
Total recurring assets at fair value  $641,863   $10,273   $629,090   $2,500 
                     
Derivative financial instruments  $807   $-   $807   $- 
Total recurring liabilities at fair value  $807   $-   $807   $- 

 

 48 

 

 

The following table presents the fair value measurements of assets measured at fair value on a non-recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy as of September 30, 2015, December 31, 2014 and September 30, 2014 (dollars in thousands):

 

   Fair Value Measurements on a Nonrecurring Basis
As of September 30, 2015
 
   Fair
Value
   Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs
(Level 3)
 
                 
Impaired loans carried at fair value  $27,859   $-   $-   $27,859 
Other real estate owned   5,737    -    -    5,737 
Purchased, non-covered other real estate owned   11,538    -    -    11,538 
Covered other real estate owned   12,203    -    -    12,203 
Total nonrecurring assets at fair value  $57,337   $-   $-   $57,337 

 

   Fair Value Measurements on a Nonrecurring Basis
As of December 31, 2014
 
   Fair
Value
   Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs
(Level 3)
 
                 
Impaired loans carried at fair value  $30,479   $-   $-   $30,479 
Purchased, non-covered other real estate owned   15,585    -    -    15,585 
Covered other real estate owned   19,907    -    -    19,907 
Total nonrecurring assets at fair value  $65,971   $-   $-   $65,971 

 

   Fair Value Measurements on a Nonrecurring Basis
As of September 30, 2014
 
   Fair
Value
   Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs
(Level 3)
 
                 
Impaired loans carried at fair value  $35,834   $-   $-   $35,834 
Purchased, non-covered other real estate owned   13,660    -    -    13,660 
Covered other real estate owned   28,883    -    -    28,883 
Total nonrecurring assets at fair value  $99,037   $-   $-   $99,037 

 

 49 

 

 

The inputs used to determine estimated fair value of impaired loans and covered loans include market conditions, loan terms, underlying collateral characteristics and discount rates. The inputs used to determine fair value of other real estate owned and covered other real estate owned include market conditions, estimated marketing period or holding period, underlying collateral characteristics and discount rates.

 

For the nine months ended September 30, 2015, the year ended December 31, 2014 and the nine months ended September 30, 2014, there was not a change in the methods and significant assumptions used to estimate fair value.

 

The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets and liabilities:

 

   Fair Value   Valuation Technique  Unobservable Inputs  Range of
Discounts
  Weighted
Average
Discount
 
As of September 30, 2015                   
Nonrecurring:                   
Impaired loans  $27,859   Third party  appraisals and discounted cash flows  Collateral discounts and discount rates  0% - 50%   25%
Other real estate owned  $5,737   Third party appraisals, Sales contracts, Broker price opinions  Collateral discounts and estimated costs to sell  0% - 43%   14%
Purchased non-covered other real estate owned  $11,538   Third party appraisals  Collateral discounts and estimated costs to sell  0% -75%   20%
Covered other real estate owned  $12,203   Third party appraisals  Collateral discounts and estimated costs to sell  0% - 73%   12%
Recurring:                   
Investment securities available for sale  $2,500   Discounted par values  Credit quality of underlying issuer  0%   0%
                    
As of December 31, 2014                   
Nonrecurring:                   
Impaired loans  $30,479   Third party  appraisals and discounted cash flows  Collateral discounts and discount rates  0% - 50%   20%
Purchased non-covered real estate owned  $15,585   Third party appraisals  Collateral discounts and estimated costs to sell  10% -96%   20%
Covered real estate owned  $19,907   Third party appraisals  Collateral discounts and estimated costs to sell  10% - 90%   11%
Recurring:                   
Investment securities available for sale  $2,500   Discounted par values  Credit quality of underlying issuer  0%   0%
                    
As of September 30, 2014                   
Nonrecurring:                   
Impaired loans  $35,834   Third party  appraisals and discounted cash flows  Collateral discounts and discount rates  4% - 90%   28%
Purchased non-covered real estate owned  $13,660   Third party appraisals  Collateral discounts and estimated costs to sell  22% - 94%   18%
Covered real estate owned  $28,883   Third party appraisals  Collateral discounts and estimated costs to sell  10% - 90%   12%
Recurring:                   
Investment securities available for sale  $2,500   Discounted par values  Credit quality of underlying issuer  0%   0%

 

 50 

 

 

The carrying amount and estimated fair value of the Company’s financial instruments, not shown elsewhere in these financial statements, were as follows:

 

       Fair Value Measurements at September 30, 2015 Using: 
   Carrying
Amount
   Level 1   Level 2   Level 3   Total 
   (Dollars in Thousands) 
Financial assets:                         
Cash and due from banks  $114,396   $114,396   $-   $-   $114,396 
Federal funds sold and interest-bearing accounts   120,925    120,925    -    -    120,925 
Loans, net   3,720,713    -    -    3,711,522    3,711,522 
FDIC loss-share receivable   4,506    -    -    (4,042)   (4,042)
Accrued interest receivable   20,062    20,062    -    -    20,062 
                          
Financial liabilities:                         
Deposits  $4,530,523   $-   $4,531,851   $-   $4,531,851 
Securities sold under agreements to repurchase   51,506    51,506    -    -    51,506 
Other borrowings   39,000    -    39,000    -    39,000 
Accrued interest payable   1,149    1,149    -    -    1,149 
Subordinated deferrable interest debentures   69,600    -    51,617    -    51,617 

 

       Fair Value Measurements at December 31, 2014 Using: 
   Carrying
Amount
   Level 1   Level 2   Level 3   Total 
   (Dollars in Thousands) 
Financial assets:                         
Cash and due from banks  $78,026   $78,026   $-   $-   $78,026 
Federal funds sold and interest-bearing accounts   92,323    92,323    -    -    92,323 
Loans, net   2,783,763    -    -    2,785,627    2,785,627 
FDIC loss-share receivable   31,351    -    -    18,764    18,764 
Accrued interest receivable   17,023    17,023    -    -    17,023 
                          
Financial liabilities:                         
Deposits  $3,431,149   $-   $3,432,059   $-   $3,432,059 
Securities sold under agreements to repurchase   73,310    73,310    -    -    73,310 
Other borrowings   78,881    -    78,881    -    78,881 
Accrued interest payable   1,382    1,382    -    -    1,382 
Subordinated deferrable interest debentures   65,325    -    46,564    -    46,564 

 

 51 

 

 

       Fair Value Measurements at September 30, 2014 Using: 
   Carrying
Amount
   Level 1   Level 2   Level 3   Total 
   (Dollars in Thousands) 
Financial assets:                         
Cash and due from banks  $69,421   $69,421   $-   $-   $69,421 
Federal funds sold and interest-bearing accounts  $40,165   $40,165   $-   $-   $40,165 
Loans, net  $2,778,026   $-   $-   $2,773,291   $2,773,291 
FDIC loss-share receivable  $38,233   $-   $-   $21,397   $21,397 
Accrued interest receivable  $17,171   $17,171   $-   $-   $17,171 
                          
Financial liabilities:                         
Deposits   3,373,119    -    3,374,055    -    3,374,055 
Securities sold under agreements to repurchase   32,351    32,351    -    -    32,351 
Other borrowings   147,409    -    147,409    -    147,409 
Accrued interest payable   1,444    1,444    -    -    1,444 
Subordinated deferrable interest debentures   65,084    -    46,214    -    46,214 

 

 52 

 

 

NOTE 14 – SEGMENT REPORTING

 

The following tables present selected financial information with respect to the Company’s reportable business segments for the three months ended September 30, 2015 and 2014:

 

  

Three Months Ended

September 30, 2015

 
   Banking Division   Retail Mortgage
Division
   Warehouse
Lending
Division
   SBA Division   Total 
   (Dollars in Thousands) 
Net interest income  $43,044   $2,485   $1,128   $742   $47,399 
Provision for loan losses   960    26    -    -    986 
Noninterest income   13,470    9,827    372    1,309    24,978 
Noninterest expense                         
Salaries and employee benefits   17,921    6,138    137    738    24,934 
Equipment and occupancy expenses   5,444    397    1    73    5,915 
Data processing and telecommunications expenses   4,998    308    22    1    5,329 
Other expenses   11,379    662    40    137    12,218 
Total noninterest expense   39,742    7,505    200    949    48,396 
Income before income tax expense   15,812    4,781    1,300    1,102    22,995 
Income tax expense   4,854    1,673    455    386    7,368 
Net income   10,958    3,108    845    716    15,627 
Less preferred stock dividends   -    -    -    -    - 
Net income available to common shareholders  $10,958   $3,108   $845   $716   $15,627 
Total assets  $4,805,387   $216,640   $92,398   $101,875   $5,216,300 
Intangible assets  $105,919   $-   $-   $-   $105,919 

 

  

Three Months Ended

September 30, 2014

 
   Banking Division   Retail Mortgage
Division
   Warehouse
Lending
Division
   SBA Division   Total 
   (Dollars in Thousands) 
Net interest income  $36,142   $1,636   $711   $643   $39,132 
Provision for loan losses   994    675    -    -    1,669 
Noninterest income   8,932    6,967    168    1,834    17,901 
Noninterest expense                         
Salaries and employee benefits   14,819    4,340    69    998    20,226 
Equipment and occupancy expenses   4,277    368    -    24    4,669 
Data processing and telecommunications expenses   3,619    285    21    3    3,928 
Other expenses   8,722    735    134    165    9,756 
Total noninterest expense   31,437    5,728    224    1,190    38,579 
Income before income tax expense   12,643    2,200    655    1,287    16,785 
Income tax expense   3,672    770    229    450    5,122 
Net income   8,971    1,430    426    837    11,663 
Less preferred stock dividends   -    -    -    -    - 
Net income available to common shareholders  $8,971   $1,430   $426   $837   $11,663 
Total assets  $3,678,769   $176,812   $50,546   $93,281   $3,999,408 
Intangible assets  $67,993   $-   $-   $-   $67,993 

 

 53 

 

 

The following tables present selected financial information with respect to the Company’s reportable business segments for the nine months ended September 30, 2015 and 2014:

 

   Nine Months Ended
September 30, 2015
 
   Banking Division   Retail Mortgage 
Division
   Warehouse
Lending
Division
   SBA Division   Total 
   (Dollars in Thousands) 
Net interest income  $115,689   $6,009   $3,142   $2,079   $126,919 
Provision for loan losses   4,343    368    -    -    4,711 
Noninterest income   31,512    26,532    1,028    4,107    63,179 
Noninterest expense                         
Salaries and employee benefits   48,958    16,257    363    2,453    68,031 
Equipment and occupancy expenses   13,964    1,173    4    137    15,278 
Data processing and telecommunications expenses   12,922    799    75    7    13,803 
Other expenses   45,783    2,744    95    353    48,975 
Total noninterest expense   121,627    20,973    537    2,950    146,087 
Income before income tax expense   21,231    11,200    3,633    3,236    39,300 
Income tax expense   6,277    3,920    1,272    1,133    12,601 
Net income   14,954    7,280    2,361    2,103    26,699 
Less preferred stock dividends   -    -    -    -    - 
Net income available to common shareholders  $14,954   $7,280   $2,361   $2,103   $26,699 

 

   Nine Months Ended
September 30, 2014
 
   Banking Division   Retail Mortgage 
Division
   Warehouse
Lending
Division
   SBA Division   Total 
   (Dollars in Thousands) 
Net interest income  $102,415   $3,522   $1,264   $1,679   $108,880 
Provision for loan losses   4,085    675    -    -    4,760 
Noninterest income   23,742    18,883    418    3,431    46,474 
Noninterest expense                         
Salaries and employee benefits   40,905    11,743    171    1,743    54,562 
Equipment and occupancy expenses   11,778    969    1    56    12,804 
Data processing and telecommunications expenses   10,535    728    43    16    11,322 
Other expenses   26,855    2,764    232    597    30,448 
Total noninterest expense   90,073    16,204    447    2,412    109,136 
Income before income tax expense   31,999    5,526    1,235    2,698    41,458 
Income tax expense   10,004    1,934    432    944    13,315 
Net income   21,995    3,592    803    1,754    28,143 
Less preferred stock dividends   286    -    -    -    286 
Net income available to common shareholders  $21,709   $3,592   $803   $1,754   $27,857 

 

 54 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Cautionary Note Regarding Any Forward-Looking Statements

 

Certain of the statements made in this report are “forward-looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control and which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

 

All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation, legislative and regulatory initiatives; additional competition in our markets; potential business strategies, including acquisitions or dispositions of assets or internal restructuring, that may be pursued by us; state and federal banking regulations; changes in or application of environmental and other laws and regulations to which we are subject; political, legal and economic conditions and developments; financial market conditions and the results of financing efforts; changes in commodity prices and interest rates; weather, natural disasters and other catastrophic events; and other factors discussed in our filings with the Securities and Exchange Commission under the Exchange Act.

 

All written or oral forward-looking statements that are made by or are attributable to us are expressly qualified in their entirety by this cautionary notice. Our forward-looking statements apply only as of the date of this report or the respective date of the document from which they are incorporated herein by reference. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date of this report, or after the respective dates on which such statements otherwise are made, whether as a result of new information, future events or otherwise.

 

Overview

 

The following is management’s discussion and analysis of certain significant factors which have affected the financial condition and results of operations of the Company as reflected in the unaudited consolidated balance sheet as of September 30, 2015, as compared with December 31, 2014, and operating results for the three- and nine-month periods ended September 30, 2015 and 2014. These comments should be read in conjunction with the Company’s unaudited consolidated financial statements and accompanying notes appearing elsewhere herein.

 

The following table sets forth unaudited selected financial data for the previous five quarters. This data should be read in conjunction with the consolidated financial statements and the notes thereto and the information contained in this Item 2.

 

 55 

 

 

(in thousands, except share data,                      For Nine Months Ended 

taxable equivalent)

Results of Operations:

 

Third

Quarter 2015

  

Second

Quarter 2015

  

First

Quarter 2015

  

Fourth

Quarter 2014

  

Third

Quarter 2014

   September 30, 2015   September 30, 2014 
Net interest income  $47,399   $40,688   $38,832   $41,006   $39,132   $126,919   $108,880 
Net interest income (tax equivalent)   48,120    41,267    39,323    41,498    39,608    128,710    110,042 
Provision for loan losses   986    2,656    1,069    888    1,669    4,711    4,760 
Non-interest income   24,978    20,626    17,575    16,362    17,901    63,179    46,474 
Non-interest expense   48,396    56,864    40,827    41,733    38,579    146,087    109,136 
Income tax expense   7,368    486    4,747    4,167    5,122    12,601    13,315 
Preferred stock dividends   -    -    -    -    -    -    286 
Net income available to common shareholders   15,627    1,308    9,764    10,580    11,663    26,699    27,857 
Selected Average Balances:                                   
Mortgage loans held for sale  $102,961   $81,823   $75,831   $97,406   $83,751   $86,387   $62,506 
Loans, net of unearned income   2,193,364    2,111,507    1,911,601    1,871,618    1,795,059    2,062,648    1,697,559 
Purchased non-covered loans   788,351    671,705    650,331    659,472    688,452    702,117    538,802 
Purchased loan pools   323,258    17,308    -    -    -    116,363    - 
Covered loans   226,301    246,422    262,693    299,981    324,498    250,979    352,707 
Investment securities   854,123    680,426    566,601    533,872    525,739    701,437    485,636 
Earning assets   4,692,915    3,999,148    3,630,843    3,545,088    3,489,563    4,113,541    3,219,288 
Assets   5,213,275    4,464,558    4,079,750    4,011,128    3,969,893    4,594,255    3,663,696 
Deposits   4,539,715    3,770,253    3,432,127    3,427,251    3,382,810    3,925,479    3,124,245 
Common shareholders’ equity   494,957    491,959    452,132    362,659    350,733    485,213    319,435 
Period-End Balances:                                   
Mortgage loans held for sale  $111,807   $108,829   $73,796   $94,759   $110,059   $111,807   $110,059 
Loans, net of unearned income   2,290,649    2,171,600    1,999,420    1,889,881    1,848,759    2,290,649    1,848,759 
Purchased non-covered loans   767,494    808,313    643,092    674,239    673,724    767,494    673,724 
Purchased loan pools   410,072    268,984    -    -    -    410,072    - 
Covered loans   191,021    209,598    245,745    271,279    313,589    191,021    313,589 
Earning assets   4,703,353    4,669,282    3,698,540    3,564,286    3,515,805    4,703,353    3,515,805 
Total assets   5,216,300    5,205,734    4,152,904    4,037,077    3,999,408    5,216,300    3,999,408 
Total deposits   4,530,523    4,511,547    3,480,231    3,431,149    3,373,119    4,530,523    3,373,119 
Common shareholders’ equity   502,300    486,770    489,783    366,028    353,830    502,300    353,830 
Per Common Share Data:                                   
Earnings per share - basic  $0.49   $0.04   $0.32   $0.40   $0.44   $0.84   $1.08 
Earnings per share - diluted   0.48    0.04    0.32    0.39    0.43    0.84    1.07 
Common book value per share   15.60    15.12    15.22    13.67    13.22    15.60    13.22 
End of period shares outstanding   32,196,117    32,195,089    32,182,143    26,773,863    26,774,402    32,196,117    26,774,402 
Weighted average shares outstanding                                   
Basic   32,195,435    32,184,355    30,442,998    26,771,636    26,773,033    31,614,015    25,705,313 
Diluted   32,553,167    32,520,453    30,796,148    27,090,293    27,160,886    31,961,969    26,099,413 
Market Price:                                   
High closing price  $28.75   $26.87   $26.55   $26.48   $24.04    28.75    24.04 
Low closing price   24.97    24.73    22.75    21.95    21.00    22.75    19.73 
Closing price for quarter   28.75    25.29    26.39    25.64    21.95    28.75    21.95 
Average daily trading volume   174,900    107,413    105,152    111,473    79,377    129,678    87,019 
Cash dividend per share   0.05    0.05    0.05    0.05    0.05    0.15    0.10 
Closing price to book value   1.84    1.67    1.73    1.88    1.66    1.84    1.66 
Performance Ratios:                                   
Return on average assets   1.19%   0.12%   0.97%   1.05%   1.17%   0.74%   1.01%
Return on average common equity   12.53%   1.07%   8.76%   11.57%   13.19%   7.21%   10.73%
Average loans to average deposits   80.05%   82.53%   84.51%   85.45%   85.48%   81.99%   84.87%
Average equity to average assets   9.49%   11.02%   11.08%   9.04%   8.83%   10.56%   8.94%
Net interest margin (tax equivalent)   4.07%   4.14%   4.39%   4.64%   4.50%   4.18%   4.57%
Efficiency ratio (tax equivalent)   66.87%   92.74%   72.38%   72.75%   67.64%   76.85%   70.25%

 

 56 

 

 

Results of Operations for the Three Months Ended September 30, 2015 and 2014

 

Consolidated Earnings and Profitability

Ameris reported net income available to common shareholders of $15.6 million, or $0.48 per diluted share, for the quarter ended September 30, 2015, compared with $11.7 million, or $0.43 per diluted share, for the same period in 2014. The Company’s return on average assets and average shareholders’ equity were 1.19% and 12.53%, respectively, in the third quarter of 2015, compared with 1.17% and 13.19%, respectively, in the third quarter of 2014.  The Company’s mortgage banking activities have had a significant impact on the overall financial results of the Company. Below is additional information regarding the retail banking activities, mortgage banking activities, warehouse lending activities and SBA activities of the Company during the third quarter of 2015 and 2014, respectively:

 

   Three Months Ended September 30, 2015 
   Banking Division   Retail Mortgage 
Division
   Warehouse 
Lending 
Division
   SBA Division   Total 
   (Dollars in Thousands) 
Net interest income  $43,044   $2,485   $1,128   $742   $47,399 
Provision for loan losses   960    26    -    -    986 
Noninterest income   13,470    9,827    372    1,309    24,978 
Noninterest expense                         
Salaries and employee benefits   17,921    6,138    137    738    24,934 
Equipment and occupancy expenses   5,444    397    1    73    5,915 
Data processing and telecommunications expenses   4,998    308    22    1    5,329 
Other expenses   11,379    662    40    137    12,218 
Total noninterest expense   39,742    7,505    200    949    48,396 
Income before income tax expense   15,812    4,781    1,300    1,102    22,995 
Income tax expense   4,854    1,673    455    386    7,368 
Net income   10,958    3,108    845    716    15,627 
Less preferred stock dividends   -    -    -    -    - 
Net income available to common shareholders  $10,958   $3,108   $845   $716   $15,627 

 

   Three Months Ended September 30, 2014 
   Banking Division   Retail Mortgage
Division
   Warehouse
Lending
Division
   SBA Division   Total 
   (Dollars in Thousands) 
Net interest income  $36,142   $1,636   $711   $643   $39,132 
Provision for loan losses   994    675    -    -    1,669 
Noninterest income   8,932    6,967    168    1,834    17,901 
Noninterest expense                         
Salaries and employee benefits   14,819    4,340    69    998    20,226 
Equipment and occupancy expenses   4,277    368    -    24    4,669 
Data processing and telecommunications expenses   3,619    285    21    3    3,928 
Other expenses   8,722    735    134    165    9,756 
Total noninterest expense   31,437    5,728    224    1,190    38,579 
Income before income tax expense   12,643    2,200    655    1,287    16,785 
Income tax expense   3,672    770    229    450    5,122 
Net income   8,971    1,430    426    837    11,663 
Less preferred stock dividends   -    -    -    -    - 
Net income available to common shareholders  $8,971   $1,430   $426   $837   $11,663 

 

 57 

 

 

Net Interest Income and Margins

 

The following tables set forth the amount of the Company’s interest income or interest expense for each category of interest-earning assets and interest-bearing liabilities and the average interest rate for total interest-earning assets and total interest-bearing liabilities, net interest spread and net interest margin on average interest-earning assets. Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 35% federal tax rate.

 

   Quarter Ended September 30, 
   2015   2014 
   Average
Balance
   Interest
Income/
Expense
   Average
Yield/
Rate Paid
   Average
Balance
   Interest
Income/
Expense
   Average
Yield/
Rate Paid
 
   ( in Thousands) 
ASSETS                              
Interest-earning assets:                              
Mortgage loans held for sale  $102,961   $970    3.74%  $83,751   $787    3.73%
Loans   2,224,490    27,258    4.86    1,795,059    21,790    4.82 
Purchased non-covered loans   788,351    11,911    5.99    688,452    12,610    7.27 
Purchased loan pools   323,258    2,997    3.68    -    -    - 
Covered loans   195,175    3,192    6.49    324,498    4,726    5.78 
Investment securities   854,123    5,342    2.48    533,948    3,704    2.75 
Short-term assets   204,557    246    0.48    63,855    47    0.29 
                               
Total interest- earning assets   4,692,915    51,916    4.39    3,489,563    43,664    4.96 
                               
Noninterest-earning assets   520,360              480,330           
                               
Total assets  $5,213,275             $3,969,893           
                               
LIABILITIES AND STOCKHOLDERS’ EQUITY                              
Interest-bearing liabilities:                              
Savings and interest-bearing demand deposits  $2,367,353   $1,223    0.20%  $1,760,108   $1,148    0.26%
Time deposits   871,492    1,298    0.59    815,286    1,392    0.68 
Other borrowings   39,000    322    3.28    47,346    558    4.68 
FHLB advances   -    -    -    55,435    51    0.36 
Federal funds purchased and securities sold under agreements to repurchase   44,480    39    0.35    44,316    39    0.35 
Subordinated deferrable interest debentures   69,448    914    5.22    64,953    866    5.29 
                               
Total interest-bearing liabilities   3,205,764    3,796    0.47    2,787,444    4,054    0.58 
                               
Demand deposits   1,300,870              807,416           
Other liabilities   25,675              24,300           
Stockholders’ equity   494,957              350,733           
                               
Total liabilities and stockholders’ equity  $5,213,275             $3,969,893           
Interest rate spread             3.92%             4.38%
Net interest income       $48,120             $39,610      
                               
Net interest margin             4.07%             4.50%

 

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On a tax equivalent basis, net interest income for the third quarter of 2015 was $48.1 million, an increase of $8.5 million, or 21.5%, compared with $39.6 million reported in the same quarter in 2014. The higher net interest income is a result of the acquisition of Merchants and 18 branches from Bank of America during the second quarter of 2015, along with organic growth in the loan portfolio. The Company’s net interest margin decreased during the third quarter of 2015 to 4.07%, compared with 4.14% during the second quarter of 2015, and compared with 4.50% reported in the third quarter of 2014. The Company’s net interest margin was negatively impacted due to the higher level of short-term assets as a percentage of earning assets. The Company intends to be fully invested in either investment securities or loans by the end of the year and to maintain minimal levels of short-term assets as it has in the past.

 

Total interest income, on a tax equivalent basis, during the third quarter of 2015 was $51.9 million, compared with $43.7 million in the same quarter of 2014. Yields on earning assets declined to 4.39%, compared with 4.96% reported in the third quarter of 2014. During the third quarter of 2015, loans comprised 77.4% of earning assets, compared with 82.9% in the same quarter of 2014. This decrease is a result of the increased short-term assets and investments received in the Merchants and branch acquisitions completed during the second quarter of 2015. Yields on legacy loans increased slightly to 4.86% in the third quarter of 2015, compared with 4.82% in the same period of 2014. The yield on purchased non-covered loans declined from 7.27% in the third quarter of 2014 to 5.99% during the third quarter of 2015. The yield on the newly acquired loan pools was 3.68% during the third quarter of 2015. Covered loan yields increased from 5.78% in the third quarter of 2014 to 6.49% in the third quarter of 2015. Management anticipates improving economic conditions and increased loan demand will provide consistent interest income.

 

Total funding costs improved to 0.32% in the third quarter of 2015, compared with 0.45% during the third quarter of 2014. Deposit costs decreased from 0.30% in the third quarter of 2014 to 0.22% in the third quarter of 2015, while non-deposit funding costs increased from 2.83% in the third quarter of 2014 to 3.31% in the third quarter of 2015. Continued shifts in the funding mix toward noninterest-bearing demand and other lower cost deposit categories were the primary reason for the decline in deposit costs. Ongoing efforts to maintain the percentage of funding from transaction deposits have succeeded such that non-CD deposits averaged 80.8% of total deposits in the third quarter of 2015, compared with 75.9% during the third quarter of 2014. Lower costs on deposits were realized due mostly to the lower rate environment and the Company’s ability to rely less on higher priced CDs due to its larger than normal position in short-term assets. Further opportunity to realize savings on deposits may be limited due to current costs. Average balances of interest bearing deposits and their respective costs for the third quarter of 2015 and 2014 are shown below:

 

(Dollars in Thousands)  September 30, 2015   September 30, 2014 
   Average
Balance
   Average
Cost
   Average
Balance
   Average
Cost
 
NOW  $907,618    0.13%  $743,352    0.17%
MMDA   1,219,736    0.29%   861,197    0.36%
Savings   239,999    0.07%   155,559    0.11%
Retail CDs < $100,000   484,007    0.50%   439,150    0.54%
Retail CDs > $100,000   387,485    0.71%   370,166    0.80%
Brokered CDs   -    0.00%   5,970    3.12%
                     
Interest-bearing deposits  $3,238,845    0.31%  $2,575,394    0.39%

 

Provision for Loan Losses

 

The Company’s provision for loan losses during the third quarter of 2015 amounted to $986,000, compared with $2.7 million in the second quarter of 2015 and $1.7 million in the third quarter of 2014. At September 30, 2015, classified loans still accruing totaled $46.7 million, compared with $43.5 million at September 30, 2014. Non-performing assets as a percent of total assets decreased from 2.22% at September 30, 2014 to 1.23% at September 30, 2015. Net charge-offs on loans during the third quarter of 2015 were $237,000, or 0.04% of loans on an annualized basis, compared with $1.6 million, or 0.35% of loans, in the third quarter of 2014. The Company’s allowance for loan losses at September 30, 2015 was $22.5 million, or 0.83% of loans (excluding purchased non-covered and covered loans), compared with $22.2 million, or 1.20% of loans (excluding purchased non-covered and covered loans), at September 30, 2014,due to improved credit quality and diversification of the loan portfolio.

 

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Noninterest Income

 

Total non-interest income for the third quarter of 2015 was $25.0 million, compared with $17.9 million in the third quarter of 2014.  Service charges on deposit accounts in the third quarter of 2015 increased to $10.8 million, compared with $6.7 million in the third quarter of 2014. This increase was driven by the growth of core accounts through the recent acquisitions of Coastal, Merchants and 18 additional branches. Income from mortgage-related activities continued to increase, from $7.5 million in the third quarter of 2014, to $10.4 million in the third quarter of 2015, as a result of the Company’s increased number of mortgage bankers and higher levels of production. Other non-interest income decreased from $2.9 million during the third quarter of 2014 to $2.5 million during the third quarter of 2015 due to the decrease in gains on sales of SBA loans, as management decided to portfolio SBA loans originated in the second and third quarter.

 

Noninterest Expense

 

Total non-interest expenses for the third quarter of 2015 increased to $48.4 million, compared with $38.6 million in the same quarter in 2014. Increases in noninterest expenses were primarily the result of the acquisitions of Merchants and 18 branches from Bank of America during the second quarter of 2015. Salaries and benefits increased $4.7 million as compared with the third quarter of 2014. Occupancy and equipment expense increased during the quarter from $4.7 million in the third quarter of 2014 to $5.9 million in the third quarter of 2015. Data processing and telecommunications expenses increased to $5.3 million for the third quarter of 2015 from $3.9 million for the same period in 2014. Credit resolution related expenses decreased from $3.2 million in the third quarter of 2014 to $1.1 million in the third quarter of 2015.

 

Income Taxes

 

Income tax expense is influenced by the amount of taxable income, the amount of tax-exempt income and the amount of non-deductible expenses. For the third quarter of 2015, the Company reported income tax expense of $7.4 million, compared with $5.1 million in the same period of 2014. The Company’s effective tax rate for the three months ending September 30, 2015 and 2014 was 32.0% and 30.5%, respectively.

 

Results of Operations for the Nine Months Ended September 30, 2015 and 2014

 

Ameris reported net income available to common shareholders of $26.7 million, or $0.84 per diluted share, for the nine months ended September 30, 2015, compared with $27.9 million, or $1.07 per diluted share, for the same period in 2014. During the second quarter of 2015, the Company completed the acquisition of Merchants and completed the acquisition and data conversion of 18 additional branches in South Georgia and North Florida. The Company recorded approximately $4.0 million of after-tax merger related charges from these acquisitions during the second and third quarters of 2015. Additionally, during the second quarter of 2015, the Company recorded $7.3 million of after-tax OREO write-downs and other credit resolution-related expenses related to an aggressive write-down on remaining non-performing assets in order to expedite their liquidation. During the second quarter of 2014, the Company recorded approximately $2.5 million of after-tax merger related charges from the Coastal acquisition. Excluding these acquisition and credit resolution-related expenses, the Company’s net income was $38.0 million, or $1.19 per diluted share, for the first nine months of 2015, compared to $30.4 million, or $1.16 per diluted share, for the same period in 2014. The Company’s mortgage banking activities have had a significant impact on the overall financial results of the Company.

 

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Below is additional information regarding the retail banking activities, mortgage banking activities, warehouse lending activities and SBA activities of the Company during the first nine months of 2015 and 2014, respectively:

 

   Nine Months Ended September 30, 2015 
   Banking Division   Retail Mortgage
Division
   Warehouse
Lending
Division
   SBA Division   Total 
   (Dollars in Thousands) 
Net interest income  $115,689   $6,009   $3,142   $2,079   $126,919 
Provision for loan losses   4,343    368    -    -    4,711 
Noninterest income   31,512    26,532    1,028    4,107    63,179 
Noninterest expense                         
Salaries and employee benefits   48,958    16,257    363    2,453    68,031 
Equipment and occupancy expenses   13,964    1,173    4    137    15,278 
Data processing and telecommunications expenses   12,922    799    75    7    13,803 
Other expenses   45,783    2,744    95    353    48,975 
Total noninterest expense   121,627    20,973    537    2,950    146,087 
Income (loss) before income tax expense (benefit)   21,231    11,200    3,633    3,236    39,300 
Income tax expense (benefit)   6,277    3,920    1,272    1,133    12,601 
Net income (loss)   14,954    7,280    2,361    2,103    26,699 
Less preferred stock dividends   -    -    -    -    - 
Net income (loss) available to common shareholders  $14,954   $7,280   $2,361   $2,103   $26,699 

 

   Nine Months Ended September 30, 2014 
   Banking Division   Retail Mortgage
Division
   Warehouse
Lending
Division
   SBA Division   Total 
   (Dollars in Thousands) 
Net interest income  $102,415   $3,522   $1,264   $1,679   $108,880 
Provision for loan losses   4,085    675    -    -    4,760 
Noninterest income   23,742    18,883    418    3,431    46,474 
Noninterest expense                         
Salaries and employee benefits   40,905    11,743    171    1,743    54,562 
Equipment and occupancy expenses   11,778    969    1    56    12,804 
Data processing and telecommunications expenses   10,535    728    43    16    11,322 
Other expenses   26,855    2,764    232    597    30,448 
Total noninterest expense   90,073    16,204    447    2,412    109,136 
Income before income tax expense   31,999    5,526    1,235    2,698    41,458 
Income tax expense   10,004    1,934    432    944    13,315 
Net income   21,995    3,592    803    1,754    28,143 
Less preferred stock dividends   286    -    -    -    286 
Net income available to common shareholders  $21,709   $3,592   $803   $1,754   $27,857 

 

Interest Income

 

Interest income, on a tax equivalent basis, for the nine months ended September 30, 2015 was $139.6 million, an increase of $18.8 million as compared with $120.8 million for the same period in 2014. Average earning assets for the nine-month period increased $894.3 million to $4.11 billion as of September 30, 2015, compared with $3.22 billion as of September 30, 2014. The increase in average earning assets is due to the Coastal, Merchants and branch acquisitions completed in the past year. Yield on average earning assets was 4.54% for the nine months ended September 30, 2015, compared with 5.02% in the first nine months of 2014.

 

Interest Expense

 

Total interest expense for the nine months ended September 30, 2015 amounted to $10.9 million, reflecting an $86,000 increase from the $10.8 million expense recorded in the same period of 2014. During the nine-month period ended September 30, 2015, the Company’s funding costs improved to 0.36% from 0.43% reported in 2014. Deposit costs decreased to 0.24% during the nine-month period ended September 30, 2015, compared with 0.30% during the same period in 2014. Total non-deposit funding costs increased from 2.66% during the first nine months of 2014 to 3.04% during the first nine months of 2015.

 

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Net Interest Income

 

The following tables set forth the amount of the Company’s interest income or interest expense for each category of interest-earning assets and interest-bearing liabilities and the average interest rate for total interest-earning assets and total interest-bearing liabilities, net interest spread and net interest margin on average interest-earning assets. Federally tax-exempt income is presented on a taxable-equivalent basis assuming a 35% federal tax rate.

 

   Nine Months Ended September 30, 
   2015   2014 
   Average
Balance
   Interest
Income/
Expense
   Average
Yield/
Rate Paid
   Average
Balance
   Interest
Income/
Expense
   Average
Yield/
Rate Paid
 
   ( in Thousands) 
ASSETS                              
Interest-earning assets:                              
Mortgage loans held for sale  $86,387   $2,426    3.75%  $62,506   $1,646    3.52%
Loans   2,097,996    75,305    4.80    1,697,559    64,433    5.07 
Purchased non-covered loans   702,117    34,079    6.49    538,802    27,408    6.80 
Purchased loan pools   116,363    3,146    3.61    -    -    - 
Covered loans   215,631    10,572    6.56    352,707    16,651    6.31 
Investment securities   701,437    13,499    2.57    493,736    10,515    2.85 
Short-term assets   193,610    556    0.38    73,978    176    0.32 
Total interest- earning assets   4,113,541    139,583    4.54    3,219,288    120,829    5.02 
                               
Noninterest-earning assets   480,714              444,408           
                               
Total assets  $4,594,255             $3,663,696           
                               
LIABILITIES AND STOCKHOLDERS’ EQUITY                              
Interest-bearing liabilities:                              
Savings and interest-bearing demand deposits  $2,029,111   $3,414    0.22%  $1,645,535   $3,208    0.26%
Time deposits   798,618    3,652    0.61    760,203    3,720    0.65 
Other borrowings   41,582    1,034    3.32    37,607    1,381    4.91 
FHLB advances   11,289    31    0.37    50,751    114    0.30 
Federal funds purchased and securities sold under agreements to repurchase   47,282    130    0.37    47,099    123    0.35 
Subordinated deferrable interest debentures   67,369    2,612    5.18    58,647    2,240    5.11 
                               
Total interest-bearing liabilities   2,995,251    10,873    0.49    2,599,842    10,786    0.55 
                               
Demand deposits   1,097,750              718,505           
Other liabilities   16,041              17,812           
Stockholders’ equity   485,213              327,537           
                               
Total liabilities and stockholders’ equity  $4,594,255             $3,663,696           
Interest rate spread             4.05%             4.47%
Net interest income       $128,710             $110,043      
                               
Net interest margin             4.18%             4.57%

 

For the year-to-date period ending September 30, 2015, the Company reported $128.7 million of net interest income on a tax equivalent basis, compared with $110.0 million of net interest income for the same period in 2014.  The average balance of earning assets increased 27.8%, from $3.2 billion during the first nine months of 2014 to $4.1 billion during the first nine months of 2015. The Company’s net interest margin decreased to 4.18% in the nine month period ending September 30, 2015, compared with 4.57% in the same period in 2014.

 

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Provision for Loan Losses

 

The provision for loan losses decreased slightly to $4.7 million for the nine months ended September 30, 2015, compared with $4.8 million in the same period in 2014. Non-performing assets (excluding covered assets) totaled $64.2 million at September 30, 2015, compared with $88.8 million at September 30, 2014.  For the nine-month period ended September 30, 2015, the Company had net charge-offs totaling $2.6 million, compared with $4.2 million for the same period in 2014. Annualized net charge-offs as a percentage of loans (excluding purchased non-covered and covered loans) decreased to 0.15% during the first nine months of 2015, compared with 0.31% during the first nine months of 2014.

 

Noninterest Income

 

Non-interest income for the first nine months of 2015 was $63.2 million, compared with $46.5 million in the same period in 2014. Service charges on deposit accounts increased approximately $6.2 million to $24.3 million in the first nine months of 2015, compared with $18.1 million in the same period in 2014.  This increase was driven by the growth of core accounts through the acquisitions of Coastal, Merchants and 18 additional branches. Income from mortgage banking activity increased from $19.5 million in the first nine months of 2014 to $28.2 million in the first nine months of 2015, due to an increased number of mortgage bankers and higher levels of production. Other non-interest income increased from $6.7 million during the first nine months of 2014 to $7.8 million during the first nine months of 2015 due to the increase in gains on sales of SBA loans.

 

Noninterest Expense

 

Total operating expenses for the first nine months of 2015 increased to $146.1 million, compared with $109.1 million in the same period in 2014. During the first nine months of 2015, the Company recorded $6.2 million of merger charges related to the Merchants and branch acquisitions, compared with $3.9 million of merger charges related to the Coastal acquisition recorded in the first nine months of 2014. Additionally, during the second quarter of 2015, the Company recorded $11.2 million of OREO write-downs and other credit resolution-related expenses related to an aggressive write-down on remaining non-performing assets to expedite their liquidation. Other increases in noninterest expenses were primarily the result of the acquisitions of Coastal at the end of the second quarter of 2014 and Merchants and 18 additional branches during the second quarter of 2015. Salaries and benefits increased $13.5 million as compared with the first nine months of 2014. Occupancy and equipment expenses for the first nine months of 2015 amounted to $15.3 million, representing an increase of $2.5 million from the same period in 2014. Data processing and telecommunications expenses increased from $11.3 million in the first nine months of 2014 to $13.8 million in the first nine months of 2015. Excluding the credit resolution-related charges discussed above, credit resolution-related expenses decreased to $4.3 million in the first nine months of 2015, compared with $8.2 million in the first nine months of 2014.

 

Income Taxes

 

In the first nine months of 2015, the Company recorded income tax expense of $12.6 million, compared with $13.3 million in the same period of 2014. The Company’s effective tax rate for the nine months ended September 30, 2015 and 2014 was 32.1%.

 

 

Financial Condition as of September 30, 2015

 

Securities

 

Debt securities with readily determinable fair values are classified as available for sale and recorded at fair value with unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive income, net of the related deferred tax effect. Equity securities, including restricted equity securities, are classified as other investment securities and are recorded at the lower of cost or market value.

 

The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the life of the securities. Realized gains and losses, determined on the basis of the cost of specific securities sold, are included in earnings on the trade date. Declines in the fair value of securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses.

 

In determining whether other-than-temporary impairment losses exist, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

 

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Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Substantially all of the unrealized losses on debt securities are related to changes in interest rates and do not affect the expected cash flows of the issuer or underlying collateral. All unrealized losses are considered temporary because each security carries an acceptable investment grade and the Company does not intend to sell these investment securities at an unrealized loss position at September 30, 2015, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at September 30, 2015, these investments are not considered impaired on an other-than temporary basis.

 

The following table illustrates certain information regarding the Company’s investment portfolio with respect to yields, sensitivities and expected cash flows over the next twelve months assuming constant prepayments and maturities:

 

   Book Value   Fair Value   Yield   Modified
Duration
   Estimated Cash
Flows
12 months
 
   Dollars in Thousands 
September 30, 2015:                         
U.S. government agencies  $14,957   $14,968    1.85%   4.26   $5,027 
State and municipal securities   161,509    164,865    3.38%   4.13    10,110 
Corporate debt securities   5,901    6,032    4.97%   7.63    500 
Mortgage-backed securities   622,313    625,520    2.39%   4.08    104,272 
Total debt securities  $804,680   $811,385    2.59%   4.12   $119,909 
                          
September 30, 2014:                         
U.S. government agencies  $14,951   $14,460    1.85%   5.22   $- 
State and municipal securities   134,641    137,635    4.05%   6.11    5,892 
Corporate debt securities   10,801    10,965    6.401%   7.38    1,250 
Mortgage-backed securities   364,399    366,449    2.47%   3.95    60,567 
Total debt securities  $524,792   $529,509    2.94%   4.61   $67,709 

 

Loans and Allowance for Loan Losses

 

At September 30, 2015, gross loans outstanding (including mortgage loans held for sale, purchased non-covered, purchased loan pools and covered loans) were $3.77 billion, an increase from $2.93 billion reported at December 31, 2014 and $2.95 billion reported at September 30, 2014. Mortgage loans held for sale increased from $94.8 million at December 31, 2014 to $111.8 million at September 30, 2015. Legacy loans (excluding purchased non-covered, purchased non-covered loan pools and covered loans) increased $400.8 million, from $1.89 billion at December 31, 2014 to $2.29 billion at September 30, 2015. Purchased non-covered loans increased $93.3 million, from $674.2 million at December 31, 2014 to $767.5 million at September 30, 2015. Purchased non-covered loan pools were $410.1 million at September 30, 2015, while the Company did not have any purchased non-covered loan pools at December 31, 2014. Covered loans decreased $80.3 million, from $271.3 million at December 31, 2014 to $191.0 million at September 30, 2015.

 

The Company regularly monitors the composition of the loan portfolio to evaluate the adequacy of the allowance for loan losses in light of the impact that changes in the economic environment may have on the loan portfolio. The Company focuses on the following loan categories: (1) commercial, financial and agricultural; (2) residential real estate; (3) commercial and farmland real estate; (4) construction and development related real estate; and (5) consumer. The Company’s management has strategically located its branches in select markets in south and southeast Georgia, north Florida, southeast Alabama and throughout South Carolina to take advantage of the growth in these areas.

 

The Company’s risk management processes include a loan review program designed to evaluate the credit risk in the loan portfolio and ensure credit grade accuracy. Through the loan review process, the Company conducts (1) a loan portfolio summary analysis, (2) charge-off and recovery analysis, (3) trends in accruing problem loan analysis, and (4) problem and past due loan analysis. This analysis process serves as a tool to assist management in assessing the overall quality of the loan portfolio and the adequacy of the allowance for loan losses. Loans classified as “substandard” are loans which are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses and/or questionable collateral values. Loans classified as “doubtful” are those loans that have characteristics similar to substandard loans but have an increased risk of loss. Loans classified as “loss” are those loans which are considered uncollectible and are in the process of being charged-off.

 

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The allowance for loan losses is a reserve established through charges to earnings in the form of a provision for loan losses. The provision for loan losses is based on management’s evaluation of the size and composition of the loan portfolio, the level of non-performing and past due loans, historical trends of charged-off loans and recoveries, prevailing economic conditions and other factors management deems appropriate. The Company’s management has established an allowance for loan losses which it believes is adequate for the probable incurred losses in the loan portfolio. Based on a credit evaluation of the loan portfolio, management presents a monthly review of the allowance for loan losses to the Company’s Board of Directors. The review that management has developed primarily focuses on risk by evaluating individual loans in certain risk categories. These categories have also been established by management and take the form of loan grades. By grading the loan portfolio in this manner the Company’s management is able to effectively evaluate the portfolio by risk, which management believes is the most effective way to analyze the loan portfolio and thus analyze the adequacy of the allowance for loan losses.

 

The allowance for loan losses is established by examining (1) the large classified loans, nonaccrual loans and loans considered impaired and evaluating them individually to determine the specific reserve allocation and (2) the remainder of the loan portfolio to allocate a portion of the allowance based on past loss experience and the economic conditions for the particular loan category. The Company also considers other factors such as changes in lending policies and procedures; changes in national, regional and/or local economic and business conditions; changes in the nature and volume of the loan portfolio; changes in the experience, ability and depth of either the bank president or lending staff; changes in the volume and severity of past due and classified loans; changes in the quality of the Company’s corporate loan review system; and other factors management deems appropriate.

 

For the nine-month period ended September 30, 2015, the Company recorded net charge-offs totaling $2.6 million, compared with $4.2 million for the period ended September 30, 2014. The provision for loan losses for the nine months ended September 30, 2015 decreased to $4.0 million, compared with $4.1 million during the nine-month period ended September 30, 2014. At the end of the third quarter of 2015, the allowance for loan losses totaled $22.5 million, or 0.98% of total legacy loans and 0.83% of total legacy loans plus purchased non-covered loan pools, compared with $21.2 million, or 1.12% of total legacy loans, at December 31, 2014 and $22.2 million, or 1.20% of total legacy loans, at September 30, 2014. The decrease in the allowance for loan losses as a percentage of legacy loans reflects the improving credit quality in the loan portfolio.

 

The following table presents an analysis of the allowance for loan losses, excluding purchased non-covered and covered loans, for the nine months ended September 30, 2015 and 2014:

 

(Dollars in Thousands)  September 30,
2015
   September 30,
2014
 
Balance of allowance for loan losses at beginning of period  $21,157   $22,377 
Provision charged to operating expense   3,950    4,071 
Charge-offs:          
Commercial, financial and agricultural   937    1,099 
Real estate – residential   966    1,339 
Real estate – commercial and farmland   1,358    2,255 
Real estate – construction and development   465    518 
Consumer installment   300    343 
Total charge-offs   4,026    5,554 
Recoveries:          
Commercial, financial and agricultural   517    230 
Real estate – residential   138    183 
Real estate – commercial and farmland   304    183 
Real estate – construction and development   314    300 
Consumer installment   117    422 
Total recoveries   1,390    1,318 
Net charge-offs   2,636    4,236 
Balance of allowance for loan losses at end of period  $22,471   $22,212 
           
Net annualized charge-offs as a percentage of average loans   0.15%   0.31%
Allowance for loan losses as a percentage of legacy loans at end of period   0.98%   1.20%
Allowance for loan losses as a percentage of legacy loans and purchased loan pools at end of period   0.83%   1.20%

 

 65 

 

 

Purchased Non-Covered Assets

 

Loans that were acquired in transactions and are not covered by the loss-sharing agreements with the FDIC (“purchased non-covered loans”) totaled $767.5 million, $674.2 million and $673.7 million at September 30, 2015, December 31, 2014 and September 30, 2014, respectively. OREO that was acquired in transactions and is not covered by the loss-sharing agreements with the FDIC totaled $11.5 million, $15.6 million and $13.7 million at September 30, 2015, December 31, 2014 and September 30, 2014, respectively. Purchased non-covered assets include assets that were acquired in FDIC-assisted transactions, but are no longer covered by the loss-sharing agreements due to the expiration of the loss-sharing agreements.

 

The Bank initially recorded the loans at their fair values, taking into consideration certain credit quality, risk and liquidity marks. The Company believes its estimation of credit risk and its adjustments to the carrying balances of the acquired loans is adequate. If the Company determines that a loan or group of loans has deteriorated from its initial assessment of fair value, a reserve for loan losses will be established to account for that difference. During the nine months ended September 30, 2015, the Company recorded a net provision for loan loss credit of $183,000 due to recoveries received on previously charged off purchased non-covered loans. During the year ended December 31, 2014 and the nine months ended September 30, 2014, the Company recorded provision for loan loss expense of $84,000 and $4,000 to account for losses where there was a decrease in cash flows from the initial estimates on purchased non-covered loans. If the Company determines that a loan or group of loans has improved from its initial assessment of fair value, then the increase in cash flows over those expected at the acquisition date is recognized as interest income prospectively.

 

Purchased non-covered loans are shown below according to loan type as of the end of the periods shown:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Commercial, financial and agricultural  $42,350   $38,041   $38,077 
Real estate – construction and development   71,109    58,362    60,262 
Real estate – commercial and farmland   385,032    306,706    296,790 
Real estate – residential   263,312    266,342    273,347 
Consumer installment   5,691    4,788    5,248 
   $767,494   $674,239   $673,724 

 

Purchased Loan Pools

 

Purchased loan pools are defined as groups of loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of September 30, 2015, purchased loan pools totaled $410.1 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $402.1 million and $8.0 million of purchase premium paid at acquisition. The Company has allocated approximately $402,000 of the allowance for loan losses to the purchased loan pools. The Company did not have any purchased loan pools at December 31, 2014 or September 30, 2014.

 

Assets Covered by Loss-Sharing Agreements with the FDIC

 

Loans that were acquired in FDIC-assisted transactions that are covered by the loss-sharing agreements with the FDIC (“covered loans”) totaled $191.0 million, $271.3 million and $313.6 million at September 30, 2015, December 31, 2014 and September 30, 2014, respectively. OREO that is covered by the loss-sharing agreements with the FDIC totaled $12.2 million, $19.9 million and $28.9 million at September 30, 2015, December 31, 2014 and September 30, 2014, respectively. The loss-sharing agreements are subject to the servicing procedures as specified in the agreements with the FDIC. The expected reimbursements under the loss-sharing agreements were recorded as an indemnification asset at their estimated fair value on the acquisition dates. The FDIC loss-share receivable reported at September 30, 2015, December 31, 2014 and September 30, 2014 was $4.5 million, $31.4 million and $38.2 million, respectively, which is net of the clawback liability the Bank expects to pay to the FDIC.

 

The Bank initially recorded the loans at their fair values, taking into consideration certain credit quality, risk and liquidity marks. The Company believes its estimation of credit risk and its adjustments to the carrying balances of the acquired loans is adequate. If the Company determines that a loan or group of loans has deteriorated from its initial assessment of fair value, a reserve for loan losses will be established to account for that difference. During the nine months ended September 30, 2015, the year ended December 31, 2014 and the nine months ended September 30, 2014, the Company recorded provision for loan loss expense of $943,000, $843,000 and $685,000, respectively, net of the FDIC loss-share receivable, to account for losses where there was a decrease in cash flows from the initial estimates on loans acquired in FDIC-assisted transactions. If the Company determines that a loan or group of loans has improved from its initial assessment of fair value, then the increase in cash flows over those expected at the acquisition date is recognized as interest income prospectively over the remaining life of the loan, with an associated write off of the remaining indemnification asset over the shorter of the life of the loan or the loss-share agreement.

 

 66 

 

 

 

Covered loans are shown below according to loan type as of the end of the periods shown:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Commercial, financial and agricultural  $13,349   $21,467   $22,545 
Real estate – construction and development   14,266    23,447    27,756 
Real estate – commercial and farmland   103,399    147,627    180,566 
Real estate – residential   59,835    78,520    82,445 
Consumer installment   172    218    277 
   $191,021   $271,279   $313,589 

 

Non-Performing Assets

 

Non-performing assets include nonaccrual loans, accruing loans contractually past due 90 days or more, repossessed personal property, and other real estate owned. Loans are placed on nonaccrual status when management has concerns relating to the ability to collect the principal and interest and generally when such loans are 90 days or more past due. Management performs a detailed review and valuation assessment of impaired loans on a quarterly basis and recognizes losses when impairment is identified. A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan contract. When a loan is placed on nonaccrual status, any interest previously accrued but not collected is reversed against current income.

 

Non-accrual loans, excluding purchased non-covered, purchased non-covered loan pools and covered loans, totaled $20.6 million at September 30, 2015, a 9.9% decrease from $22.8 million reported at the end of the third quarter of 2014. Nonaccrual purchased non-covered loans totaled $11.4 million at September 30, 2015, compared with $17.01 million at September 30, 2014. At September 30, 2015, other real estate owned (excluding purchased non-covered and covered OREO) totaled $20.7 million, compared with $22.6 million at June 30, 2015 and $35.3 million at September 30, 2014. Management regularly assesses the valuation of OREO through periodic reappraisal and through inquiries received in the marketing process.  At the end of the third quarter of 2015, total non-performing assets were 1.23% of total assets, compared with 2.20% at December 31, 2014 and 2.22% at September 30, 2014.

 

Non-performing assets (excluding covered assets) at September 30, 2015, December 31, 2014 and September 30, 2014 were as follows:

 

(Dollars in Thousands)  September 30,
2015
   December 31,
2014
   September 30,
2014
 
Total nonaccrual loans (excluding purchased non-covered and covered loans)  $20,558   $21,728   $22,810 
Nonaccrual purchased non-covered loans   11,374    18,249    17,007 
Accruing loans delinquent 90 days or more   -    1    - 
Foreclosed assets (excluding purchased assets)   20,730    33,160    35,320 
Purchased, non-covered other real estate owned   11,538    15,585    13,660 
Total non-performing assets  $64,200   $88,723   $88,797 

 

 67 

 

 

Troubled Debt Restructurings

 

The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. The following table presents the amount of troubled debt restructurings by loan class, excluding purchased non-covered and covered loans, classified separately as accrual and non-accrual at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015  Accruing Loans   Non-Accruing Loans 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   4   $238    8   $68 
Real estate – construction & development   12    838    2    30 
Real estate – commercial & farmland   15    5,719    4    943 
Real estate – residential   51    5,209    16    759 
Consumer installment   15    71    18    64 
Total   97   $12,075    48   $1,864 

 

As of December 31, 2014  Accruing Loans   Non-Accruing Loans 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   6   $290    2   $13 
Real estate – construction & development   9    679    5    228 
Real estate – commercial & farmland   19    6,477    3    724 
Real estate – residential   47    5,258    11    1,485 
Consumer installment   11    55    11    73 
Total   92   $12,759    32   $2,523 

 

As of September 30, 2014  Accruing Loans   Non-Accruing Loans 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   4   $257    4   $507 
Real estate – construction & development   11    1,917    4    196 
Real estate – commercial & farmland   21    7,080    2    1,672 
Real estate – residential   43    7,973    10    759 
Consumer installment   9    34    12    93 
Total   88   $17,261    32   $3,227 

 

 68 

 

 

The following table presents the amount of troubled debt restructurings by loan class, excluding purchased non-covered and covered loans, classified separately as those currently paying under restructured terms and those that have defaulted (defined as 30 days past due) under restructured terms at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015 

Loans Currently Paying

Under Restructured

Terms

  

Loans that have Defaulted

Under Restructured

Terms

 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   8   $288    4   $17 
Real estate – construction & development   10    780    4    88 
Real estate – commercial & farmland   14    5,650    5    1,011 
Real estate – residential   46    4,212    21    1,756 
Consumer installment   18    81    15    55 
Total   96   $11,011    49   $2,927 

 

As of December 31, 2014  Loans Currently Paying
Under Restructured
Terms
   Loans that have Defaulted
Under Restructured
Terms
 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   7   $67    1   $236 
Real estate – construction & development   9    679    5    228 
Real estate – commercial & farmland   19    6,477    3    724 
Real estate – residential   45    5,036    13    1,707 
Consumer installment   14    67    8    61 
Total   94   $12,326    30   $2,956 

 

As of September 30, 2014  Loans Currently Paying
Under Restructured
Terms
   Loans that have Defaulted
Under Restructured
Terms
 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   6   $271    2   $493 
Real estate – construction & development   9    1,881    6    232 
Real estate – commercial & farmland   19    6,811    4    1,941 
Real estate – residential   37    6,919    16    1,813 
Consumer installment   7    29    14    98 
Total   78   $15,911    42   $4,577 

 

 69 

 

 

The following table presents the amount of troubled debt restructurings, excluding purchased non-covered and covered loans, by types of concessions made, classified separately as accrual and non-accrual at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015  Accruing Loans   Non-Accruing Loans 
Type of concession:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Forbearance of interest   11   $1,861    7   $319 
Forgiveness of principal   2    891    2    841 
Forbearance of principal   5    101    7    94 
Rate reduction only   16    2,329    1    29 
Rate reduction, forbearance of interest   40    2,516    21    273 
Rate reduction, forbearance of principal   13    3,341    9    206 
Rate reduction, forgiveness of interest   9    1,032    1    102 
Rate reduction, forgiveness of principal   1    4    -    - 
Total   97   $12,075    48   $1,864 

 

As of December 31, 2014  Accruing Loans   Non-Accruing Loans 
Type of concession:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Forbearance of Interest   10   $1,917    4   $270 
Forgiveness of Principal   5    2,394    -    - 
Forbearances of Principal   6    165    -    - 
Rate Reduction Only   16    3,677    4    477 
Rate Reduction, Forbearance of Interest   31    2,160    21    1,738 
Rate Reduction, Forbearance of Principal   19    1,981    2    13 
Rate Reduction, Forgiveness of Interest   4    460    -    - 
Rate Reduction, Forgiveness of Principal   1    5    1    25 
Total   92   $12,759    32   $2,523 

 

As of September 30, 2014  Accruing Loans   Non-Accruing Loans 
Type of concession:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Forbearance of interest   13   $2,197    1   $31 
Forgiveness of principal   6    2,426    -    - 
Rate reduction only   17    7,350    4    509 
Rate reduction, forbearance of interest   35    3,390    23    2,619 
Rate reduction, forbearance of principal   17    1,898    3    39 
Rate reduction, payment modification   -    -    1    29 
Total   88   $17,261    32   $3,227 

 

 70 

 

 

The following table presents the amount of troubled debt restructurings, excluding purchased non-covered and covered loans, by collateral types, classified separately as accrual and non-accrual at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015  Accruing Loans   Non-Accruing Loans 
Collateral type:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Warehouse   5   $817    -   $- 
Raw land   5    74    2    30 
Agricultural land   1    313    1    59 
Hotel & motel   3    1,922    -    - 
Office   3    504    -    - 
Retail, including strip centers   3    2,164    2    527 
1-4 family residential   58    5,972    19    785 
Church   -    -    1    357 
Automobile/equipment/inventory   18    81    22    101 
Unsecured   1    228    1    5 
Total   97   $12,075    48   $1,864 

 

As of December 31, 2014  Accruing Loans   Non-Accruing Loans 
Collateral type:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Warehouse   4   $1,346    -   $- 
Raw Land   11    2,345    6    292 
Hotel & Motel   3    2,185    -    - 
Office   4    1,909    -    - 
Retail, including Strip Centers   4    1,095    2    660 
1-4 Family Residential   36    7,747    12    1,501 
Church   1    250    -    - 
Automobile/Equipment/CD   8    92    12    70 
Unsecured   1    245    -    - 
Total   92   $12,759    32   $2,523 

 

As of September 30, 2014  Accruing Loans   Non-Accruing Loans 
Collateral type:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Warehouse   6   $944    -   $- 
Raw land   5    1,258    1    29 
Agricultural land   2    373    -    - 
Hotel & motel   3    2,062    -    - 
Office   4    1,639    -    - 
Retail, including strip centers   5    1,700    2    1,672 
1-4 family residential   50    8,638    14    943 
Church   1    362    -    - 
Automobile/equipment/inventory   11    47    14    540 
Unsecured   1    238    1    43 
Total   88   $17,261    32   $3,227 

 

 71 

 

 

As of September 30, 2015, December 31, 2014 and September 30, 2014, the Company had a balance of $7.7 million, $1.2 million and $830,000, respectively, in troubled debt restructurings included in purchased non-covered loans. During the nine months ended September 30, 2015, the Company transferred approximately $4.1 million of covered troubled debt restructurings to purchased non-covered troubled debt restructurings due to the expiration of the loss-sharing agreements. The following table presents the amount of troubled debt restructurings by loan class of purchased non-covered loans, classified separately as accrual and non-accrual at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015  Accruing Loans   Non-Accruing Loans 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   -   $-    1   $1 
Real estate – construction & development   1    351    2    30 
Real estate – commercial & farmland   6    4,071    1    36 
Real estate – residential   13    2,761    3    397 
Consumer installment   2    5    2    3 
Total   22   $7,188    9   $467 

 

As of December 31, 2014  Accruing Loans   Non-Accruing Loans 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   -   $-    -   $- 
Real estate – construction & development   1    317    -    - 
Real estate – commercial & farmland   1    346    -    - 
Real estate – residential   6    547    1    25 
Consumer installment   1    2    -    - 
Total   9   $1,212    1   $25 

 

As of September 30, 2014  Accruing Loans   Non-Accruing Loans 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   -   $-    -   $- 
Real estate – construction & development   1    305    -    - 
Real estate – commercial & farmland   -    -    -    - 
Real estate – residential   4    275    2    247 
Consumer installment   1    3    -    - 
Total   6   $583    2   $247 

 

 72 

 

 

The following table presents the amount of troubled debt restructurings by loan class of purchased non-covered loans, classified separately as those currently paying under restructured terms and those that have defaulted (defined as 30 days past due) under restructured terms at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015  Loans Currently Paying
Under Restructured Terms
   Loans that have Defaulted
Under Restructured Terms
 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   1   $1    -   $- 
Real estate – construction & development   3    382    -    - 
Real estate – commercial & farmland   7    4,106    -    - 
Real estate – residential   12    2,451    4    707 
Consumer installment   4    8    -    - 
Total   27   $6,948    4   $707 

 

As of December 31, 2014  Loans Currently Paying
Under Restructured Terms
   Loans that have Defaulted
Under Restructured Terms
 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   -   $-    -   $- 
Real estate – construction & development   -    -    1    317 
Real estate – commercial & farmland   1    346    -    - 
Real estate – residential   5    480    2    92 
Consumer installment   -    -    1    2 
Total   6   $826    4   $411 

 

As of September 30, 2014  Loans Currently Paying
Under Restructured Terms
   Loans that have Defaulted
Under Restructured Terms
 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   -   $-    -   $- 
Real estate – construction & development   1    305    -    - 
Real estate – commercial & farmland   -    -    -    - 
Real estate – residential   4    275    2    247 
Consumer installment   1    3    -    - 
Total   6   $583    2   $247 

 

 73 

 

 

The following table presents the amount of troubled debt restructurings included in purchased non-covered loans, by types of concessions made, classified separately as accrual and non-accrual at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015  Accruing Loans   Non-Accruing Loans 
Type of Concession:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Forbearance of Interest   1   $-    1   $67 
Forbearance of Principal   2    586    -    - 
Payment Modification Only   2    835    1    308 
Rate Reduction Only   6    3,700    1    22 
Rate Reduction, Forbearance of Interest   6    927    6    70 
Rate Reduction, Forbearance of Principal   3    988    -    - 
Rate Reduction, Forgiveness of Interest   2    152    -    - 
Total   22   $7,188    9   $467 

 

As of December 31, 2014  Accruing Loans   Non-Accruing Loans 
Type of Concession:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Forbearance of Interest   2   $69    -   $- 
Payment Modification Only   1    346    -    - 
Rate Reduction Only   2    373    1    25 
Rate Reduction, Forgiveness of Interest   2    155    -    - 
Rate Reduction, Forbearance of Interest   1    231    -    - 
Rate Reduction, Forbearance of Principal   1    38    -    - 
Total   9   $1,212    1   $25 

 

As of September 30, 2014  Accruing Loans   Non-Accruing Loans 
Type of Concession:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Forbearance of Interest   2   $67    -   $- 
Rate Reduction Only   2    361    1    26 
Rate Reduction, Forbearance of Interest   2    155    1    221 
Total   6   $583    2   $247 

 

 74 

 

 

The following table presents the amount of troubled debt restructurings included in purchased non-covered loans, by collateral types, classified separately as accrual and non-accrual at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015  Accruing Loans   Non-Accruing Loans 
Collateral type:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Warehouse   1   $289    -   $- 
Raw Land   -    -    2    30 
Office   1    452    -    - 
Retail, including Strip Centers   4    3,330    -    - 
1-4 Family Residential   14    3,112    4    433 
Automobile/Equipment/Inventory   2    5    3    4 
Total   22   $7,188    9   $467 

 

As of December 31, 2014  Accruing Loans   Non-Accruing Loans 
Collateral type:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Warehouse   1   $346    -   $- 
Raw Land   2    373    -    - 
1-4 Family Residential   5    491    1    25 
Automobile/Equipment/Inventory   1    2    -    - 
Total   9   $1,212    1   $25 

 

As of September 30, 2014  Accruing Loans   Non-Accruing Loans 
Collateral type:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
1-4 Family Residential   5   $580    2   $247 
Automobile/Equipment/Inventory   1    3    -    - 
Total   6   $583    2   $247 

 

 75 

 

 

As of September 30, 2015, December 31, 2014 and September 30, 2014, the Company had a balance of $20.5 million, $24.6 million and $25.0 million, respectively, in troubled debt restructurings included in covered loans. During the nine months ended September 30, 2015, the Company transferred approximately $4.1 million of covered troubled debt restructurings to purchased non-covered troubled debt restructurings due to the expiration of the loss-sharing agreements. The following table presents the amount of troubled debt restructurings by loan class of covered loans, classified separately as accrual and non-accrual at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015  Accruing Loans   Non-Accruing Loans 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   1   $2    2   $- 
Real estate – construction & development   3    2,847    3    325 
Real estate – commercial & farmland   9    3,101    8    2,449 
Real estate – residential   96    10,625    17    1,167 
Consumer installment   1    1    -    - 
Total   110   $16,576    30   $3,941 

 

As of December 31, 2014  Accruing Loans   Non-Accruing Loans 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   2   $40    2   $- 
Real estate – construction & development   4    3,037    2    29 
Real estate – commercial & farmland   14    8,079    5    1,082 
Real estate – residential   96    11,460    8    831 
Consumer installment   1    3    -    - 
Total   117   $22,619    17   $1,942 

 

As of September 30, 2014  Accruing Loans   Non-Accruing Loans 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   1   $26    1   $3 
Real estate – construction & development   3    3,024    3    56 
Real estate – commercial & farmland   15    8,501    6    1,225 
Real estate – residential   94    11,202    13    965 
Consumer installment   1    4    -    - 
Total   114   $22,757    23   $2,249 

 

 76 

 

 

The following table presents the amount of troubled debt restructurings by loan class of covered loans, classified separately as those currently paying under restructured terms and those that have defaulted (defined as 30 days past due) under restructured terms at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015  Loans Currently Paying
Under Restructured Terms
   Loans that have Defaulted
Under Restructured Terms
 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   3   $3    -   $- 
Real estate – construction & development   6    3,171    -    - 
Real estate – commercial & farmland   14    5,372    3    178 
Real estate – residential   92    9,240    21    2,552 
Consumer installment   1    1    -    - 
Total   116   $17,787    24   $2,730 

 

As of December 31, 2014  Loans Currently Paying
Under Restructured Terms
   Loans that have Defaulted
Under Restructured Terms
 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   4   $40    -   $- 
Real estate – construction & development   4    3,037    2    29 
Real estate – commercial & farmland   18    9,082    1    79 
Real estate – residential   79    9,897    25    2,394 
Consumer installment   1    3    -    - 
Total   106   $22,059    28   $2,502 

 

As of September 30, 2014  Loans Currently Paying
Under Restructured Terms
   Loans that have Defaulted
Under Restructured Terms
 
Loan class:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Commercial, financial & agricultural   2   $29    -   $- 
Real estate – construction & development   4    3,050    2    29 
Real estate – commercial & farmland   18    9,279    3    447 
Real estate – residential   86    10,168    21    2,000 
Consumer installment   1    4    -    - 
Total   111   $22,530    26   $2,476 

 

 77 

 

 

The following table presents the amount of troubled debt restructurings included in covered loans, by types of concessions made, classified separately as accrual and non-accrual at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015  Accruing Loans   Non-Accruing Loans 
Type of Concession:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Forbearance of Interest   4   $1,564    9   $1,342 
Forbearance of Principal   -    -    3    426 
Rate Reduction Only   89    13,249    8    803 
Rate Reduction, Forbearance of Interest   10    655    8    320 
Rate Reduction, Forbearance of Principal   4    713    2    1,050 
Rate Reduction, Forgiveness of Interest   3    395    -    - 
Total   110   $16,576    30   $3,941 

 

As of December 31, 2014  Accruing Loans   Non-Accruing Loans 
Type of Concession:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Forbearance of Interest   3   $1,532    3   $88 
Forbearance of Principal   1    -    1    - 
Rate Reduction Only   97    17,360    7    1,626 
Rate Reduction, Forbearance of Interest   5    274    3    14 
Rate Reduction, Forbearance of Principal   8    3,052    3    214 
Rate Reduction, Forgiveness of Interest   3    401    -    - 
Total   117   $22,619    17   $1,942 

 

As of September 30, 2014  Accruing Loans   Non-Accruing Loans 
Type of Concession:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Forbearance of Interest   2   $1,548    4   $116 
Forbearance of Principal   -    -    8    228 
Rate Reduction Only   97    17,404    5    760 
Rate Reduction, Forbearance of Interest   6    490    4    241 
Rate Reduction, Forbearance of Principal   9    3,315    1    89 
Rate Reduction, Payment Modification   -    -    1    815 
Total   114   $22,757    23   $2,249 

 

 78 

 

 

The following table presents the amount of troubled debt restructurings included in covered loans, by collateral types, classified separately as accrual and non-accrual at September 30, 2015, December 31, 2014 and September 30, 2014:

 

As of September 30, 2015  Accruing Loans   Non-Accruing Loans 
Collateral type:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Warehouse   2   $1,418    -   $- 
Raw Land   1    431    4    346 
Agricultural Land   -    -    1    512 
Hotel & Motel   4    3,199    1    930 
Office   1    90    -    - 
Retail, including Strip Centers   3    662    1    6 
1-4 Family Residential   97    10,718    21    2,147 
Automobile/Equipment/Inventory   2    58    2    - 
Total   110   $16,576    30   $3,941 

 

As of December 31, 2014  Accruing Loans   Non-Accruing Loans 
Collateral type:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Warehouse   2   $1,510    1   $79 
Raw Land   3    411    1    14 
Hotel & Motel   5    4,395    -    - 
Office   1    473    2    858 
Retail, including Strip Centers   6    4,174    2    145 
1-4 Family Residential   98    11,616    9    846 
Automobile/Equipment/Inventory   1    3    2    - 
Unsecured   1    37    -    - 
Total   117   $22,619    17   $1,942 

 

As of September 30, 2014  Accruing Loans   Non-Accruing Loans 
Collateral type:  #  

Balance

(in thousands)

   #  

Balance

(in thousands)

 
Warehouse   2   $1,548    2   $309 
Raw Land   1    376    3    63 
Hotel & Motel   6    4,635    -    - 
Office   1    480    2    883 
Retail, including Strip Centers   7    4,332    1    10 
1-4 Family Residential   96    11,361    14    981 
Automobile/Equipment/Inventory   -    -    1    3 
Unsecured   1    25    -    - 
Total   114   $22,757    23   $2,249 

 

Commercial Lending Practices

 

On December 12, 2006, the Federal Bank Regulatory Agencies released guidance on Concentration in Commercial Real Estate Lending. This guidance defines commercial real estate (“CRE”) loans as loans secured by raw land, land development and construction (including 1-4 family residential construction), multi-family property and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property, excluding owner occupied properties (loans for which 50% or more of the source of repayment is derived from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property) or the proceeds of the sale, refinancing or permanent financing of the property. Loans for owner occupied CRE are generally excluded from the CRE guidance.

 

The CRE guidance is applicable when either:

 

(1)total loans for construction, land development, and other land, net of owner occupied loans, represent 100% or more of a bank’s total risk-based capital; or

 

(2)total loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land, net of owner occupied loans, represent 300% or more of a bank’s total risk-based capital.

 

 79 

 

 

Banks that are subject to the CRE guidance criteria are required to implement enhanced strategic planning, CRE underwriting policies, risk management and internal controls, portfolio stress testing, risk exposure limits, and other policies, including management compensation and incentives, to address the CRE risks. Higher allowances for loan losses and capital levels may also be appropriate.

 

As of September 30, 2015, the Company exhibited a concentration in the CRE loan category based on Federal Reserve Call codes. The primary risks of CRE lending are:

 

(1)within CRE loans, construction and development loans are somewhat dependent upon continued strength in demand for residential real estate, which is reliant on favorable real estate mortgage rates and changing population demographics;

 

(2)on average, CRE loan sizes are generally larger than non-CRE loan types; and

 

(3)certain construction and development loans may be less predictable and more difficult to evaluate and monitor.

 

The following table outlines CRE loan categories and CRE loans as a percentage of total loans as of September 30, 2015 and December 31, 2014. The loan categories and concentrations below are based on Federal Reserve Call codes and include purchased non-covered and covered loans:

 

(Dollars in Thousands)  September 30, 2015   December 31, 2014 
   Balance   % of Total
Loans
   Balance   % of Total
Loans
 
Construction and development loans  $306,173    8%  $243,316    9%
Multi-family loans   93,417    3%   72,356    3%
Nonfarm non-residential loans   1,462,842    40%   1,289,501    45%
Total CRE Loans   1,862,432    51%   1,605,173    57%
All other loan types   1,796,804    49%   1,230,226    43%
                     
Total Loans  $3,659,236    100%  $2,835,399    100%

 

The following table outlines the percentage of total CRE loans, net of owner occupied loans to total risk-based capital, and the Company’s internal concentration limits as of September 30, 2015 and December 31, 2014:

 

   Internal   September 30, 2015   December 31, 2014 
   Limit   Actual   Actual 
Construction and development   100%   61%   67%
Commercial real estate   300%   194%   232%

 

Short-Term Investments

 

The Company’s short-term investments are comprised of federal funds sold and interest-bearing balances. At September 30, 2015, the Company’s short-term investments were $120.9 million, compared with $92.3 million and $40.2 million at December 31, 2014 and September 30, 2014, respectively. The increase in short-term investments during the first nine months of 2015 is due primarily to the additional cash received in the Merchants and branch acquisitions during the second quarter of 2015. At September 30, 2015, $5.5 million was in federal funds sold and $115.4 million was in interest-bearing balances at correspondent banks and the Federal Reserve Bank of Atlanta.  

 

Derivative Instruments and Hedging Activities

 

The Company has a cash flow hedge that matures September 15, 2020 with a notional amount of $37.1 million at September 30, 2015, December 31, 2014 and September 30, 2014 for the purpose of converting the variable rate on the junior subordinated debentures to a fixed rate of 4.11%. The fair value of these instruments amounted to a liability of approximately $2.0 million, $1.3 million and $807,000 at September 30, 2015, December 31, 2014 and September 30, 2014, respectively. The Company also has forward contracts and IRLCs to hedge changes in the value of the mortgage inventory due to changes in market interest rates. The fair value of these instruments amounted to a net asset of approximately $3.5 million, $1.5 million and $2.3 million at September 30, 2015, December 31, 2014 and September 30, 2014, respectively. No material hedge ineffectiveness from the cash flow hedge was recognized in the statement of operations. All components of the derivative’s gain or loss are included in the assessment of hedge effectiveness.

 

 80 

 

 

Capital

 

On January 29, 2015, the Company completed a private placement of 5,320,000 shares of common stock at a price of $22.50 per share. The Company received net proceeds from the issuance of approximately $114.5 million, after deducting placement agent commissions and other issuance costs. The Company used the net proceeds to fund the acquisitions of Merchants and 18 Bank of America branches located in North Florida and South Georgia.

 

Capital management consists of providing equity to support both current and anticipated future operations. The Company is subject to capital adequacy requirements imposed by the Federal Reserve Board (the “FRB”) and the Georgia Department of Banking and Finance (the “GDBF”), and the Bank is subject to capital adequacy requirements imposed by the FDIC and the GDBF.

 

The FRB, the FDIC and the GDBF have adopted risk-based capital requirements for assessing bank holding company and bank capital adequacy. These standards define and establish minimum capital requirements in relation to assets and off-balance sheet exposure, adjusted for credit risk. The risk-based capital standards currently in effect are designed to make regulatory capital requirements more sensitive to differences in risk profiles among bank holding companies and banks and to account for off-balance sheet exposure. 

 

In July 2013, the Federal Reserve published final rules for the adoption of the Basel III regulatory capital framework (the "Basel III Capital Rules"). The Basel III Capital Rules defined a new capital measure called "Common Equity Tier 1" ("CET1"), established that Tier 1 capital consist of Common Equity Tier 1 and "Additional Tier 1 Capital" instruments meeting specified requirements, defined Common Equity Tier 1, established a capital conservation buffer and expanded the scope of the adjustments as compared with existing regulations. The capital conservation buffer is being phased in from 0.0% for 2015 to 2.50% by 2019. The Basel III Capital Rules became effective for us on January 1, 2015 with certain transition provisions fully phased in on January 1, 2019.

 

The regulatory capital standards are defined by the following key measurements:

 

a) The “Leverage Ratio” is defined as Tier 1 capital to average assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a leverage ratio greater than or equal to 4.00%. For a bank to be considered “well capitalized,” it must maintain a leverage ratio greater than or equal to 5.00%.

 

b) The “CET1 Ratio” is defined as Common equity tier 1 capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a core capital ratio greater than or equal to 4.50%. For a bank to be considered “well capitalized,” it must maintain a core capital ratio greater than or equal to 6.50%.

 

c) The “Core Capital Ratio” is defined as Tier 1 capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a core capital ratio greater than or equal to 6.00%. For a bank to be considered “well capitalized,” it must maintain a core capital ratio greater than or equal to 8.00%.

 

d) The “Total Capital Ratio” is defined as total capital to total risk weighted assets. To be considered “adequately capitalized” under this measurement, a bank must maintain a total capital ratio greater than or equal to 8.00%. For a bank to be considered “well capitalized,” it must maintain a total capital ratio greater than or equal to 10.00%.

 

As of September 30, 2015, under the regulatory capital standards, the Bank was considered “well capitalized” under all capital measurements. The following table sets forth the regulatory capital ratios of Ameris at September 30, 2015, December 31, 2014 and September 30, 2014:

 

   September 30,
2015
   December 31,
2014
   September 30,
2014
 
Leverage Ratio(tier 1 capital to average assets)               
Consolidated   8.85%   8.94%   8.83%
Ameris Bank   9.44    10.01    9.67 
CET1 Ratio(common equity tier 1capital to risk weighted assets)               
Consolidated   10.04    N/A    N/A 
Ameris Bank   12.31    N/A    N/A 
Core Capital Ratio(tier 1 capital to risk weighted assets)               
Consolidated   11.52    12.66    12.47 
Ameris Bank   12.31    14.14    13.66 
Total Capital Ratio(total capital to risk weighted assets)               
Consolidated   12.09    13.42    13.27 
Ameris Bank   12.89    14.90    14.46 

 

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Capital Purchase Program

On November 21, 2008, the Company, pursuant to the Capital Purchase Program established in connection with the Troubled Asset Relief Program, issued and sold to the U.S. Treasury, for an aggregate cash purchase price of $52 million, (i) 52,000 shares (the “Preferred Shares”) of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, having a liquidation preference of $1,000 per share, and (ii) a ten-year warrant (the “Warrant”) to purchase up to 679,443 shares of our common stock at an exercise price of $11.48 per share. On June 14, 2012, the Preferred Shares were sold by the Treasury through a registered public offering. On August 22, 2012, the Company repurchased the Warrant from the Treasury for $2.67 million. In December 2012, the Company repurchased 24,000 outstanding Preferred Shares, and in March 2014, the Company redeemed the remaining 28,000 outstanding Preferred Shares. 

 

Interest Rate Sensitivity and Liquidity

 

The Company’s primary market risk exposures are credit risk, interest rate risk, and to a lesser degree, liquidity risk. The Bank operates under an Asset Liability Management Policy approved by the Company’s Board of Directors and the Asset and Liability Committee (the “ALCO Committee”). The policy outlines limits on interest rate risk in terms of changes in net interest income and changes in the net market values of assets and liabilities over certain changes in interest rate environments. These measurements are made through a simulation model which projects the impact of changes in interest rates on the Bank’s assets and liabilities. The policy also outlines responsibility for monitoring interest rate risk, and the process for the approval, implementation and monitoring of interest rate risk strategies to achieve the Bank’s interest rate risk objectives.

 

The ALCO Committee is comprised of senior officers of Ameris and two outside members of the Company’s Board of Directors. The ALCO Committee makes all strategic decisions with respect to the sources and uses of funds that may affect net interest income, including net interest spread and net interest margin. The objective of the ALCO Committee is to identify the interest rate, liquidity and market value risks of the Company’s balance sheet and use reasonable methods approved by the Company’s Board of Directors and executive management to minimize those identified risks.

 

The normal course of business activity exposes the Company to interest rate risk. Interest rate risk is managed within an overall asset and liability framework for the Company. The principal objectives of asset and liability management are to predict the sensitivity of net interest spreads to potential changes in interest rates, control risk and enhance profitability. Funding positions are kept within predetermined limits designed to properly manage risk and liquidity. The Company employs sensitivity analysis in the form of a net interest income simulation to help characterize the market risk arising from changes in interest rates. In addition, fluctuations in interest rates usually result in changes in the fair market value of the Company’s financial instruments, cash flows and net interest income. The Company’s interest rate risk position is managed by the ALCO Committee.

 

The Company uses a simulation modeling process to measure interest rate risk and evaluate potential strategies. Interest rate scenario models are prepared using software created and licensed from an outside vendor. The Company’s simulation includes all financial assets and liabilities. Simulation results quantify interest rate risk under various interest rate scenarios. Management then develops and implements appropriate strategies. The ALCO Committee has determined that an acceptable level of interest rate risk would be for net interest income to decrease no more than 5.00% given a change in selected interest rates of 200 basis points over any 24-month period.

 

Liquidity management involves the matching of the cash flow requirements of customers, who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs, and the ability of Ameris to manage those requirements. The Company strives to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance it has in short-term investments at any given time will adequately cover any reasonably anticipated immediate need for funds. Additionally, the Bank maintains relationships with correspondent banks, which could provide funds on short notice, if needed. The Company has invested in FHLB stock for the purpose of establishing credit lines with the FHLB. The credit availability to the Bank is equal to 20% of the Bank’s total assets as reported on the most recent quarterly financial information submitted to the regulators subject to the pledging of sufficient collateral. At September 30, 2015, December 31, 2014 and September 30, 2014, there were $39.0 million, $78.9 million and $147.4 million, respectively, outstanding borrowings with the Company’s correspondent banks.  

 

 82 

 

 

The following liquidity ratios compare certain assets and liabilities to total deposits or total assets:

 

   September 30,
2015
   June 30,
2015
   March 31,
2015
   December 31,
2014
   September 30,
2014
 
Investment securities available for sale to total deposits   17.91%   19.11%   17.54%   15.79%   15.70%
Loans (net of unearned income) to total deposits   80.77%   76.66%   82.99%   82.64%   84.08%
Interest-earning assets to total assets   90.17%   89.69%   89.06%   88.29%   87.91%
Interest-bearing deposits to total deposits   71.84%   71.62%   72.21%   75.54%   75.79%

 

The liquidity resources of the Company are monitored continuously by the ALCO Committee and on a periodic basis by state and federal regulatory authorities. As determined under guidelines established by these regulatory authorities, the Company’s and the Bank’s liquidity ratios at September 30, 2015 were considered satisfactory. The Company is aware of no events or trends likely to result in a material change in liquidity.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

The Company is exposed only to U.S. dollar interest rate changes, and, accordingly, the Company manages exposure by considering the possible changes in the net interest margin. The Company does not have any trading instruments nor does it classify any portion of the investment portfolio as held for trading. The Company’s hedging activities are limited to cash flow hedges and are part of the Company’s program to manage interest rate sensitivity. At September 30, 2015, the Company had one effective LIBOR rate swap with a notional amount of $37.1 million. The LIBOR rate swap exchanges fixed rate payments of 4.11% for floating rate payments based on the three month LIBOR and matures September 2020. The Company also had forward contracts and IRLCs to hedge changes in the value of the mortgage inventory due to changes in market interest rates. The fair value of these instruments amounted to a net asset of approximately $3.5 million, $1.5 million and $2.3 million at September 30, 2015, December 31, 2014, and September 30, 2014 respectively. Finally, the Company has no exposure to foreign currency exchange rate risk, commodity price risk and other market risks.

 

Interest rates play a major part in the net interest income of a financial institution. The sensitivity to rate changes is known as “interest rate risk.” The repricing of interest-earning assets and interest-bearing liabilities can influence the changes in net interest income. As part of the Company’s asset/liability management program, the timing of repriced assets and liabilities is referred to as “gap management.”

 

The Company uses simulation analysis to monitor changes in net interest income due to changes in market interest rates. The simulation of rising, declining and flat interest rate scenarios allows management to monitor and adjust interest rate sensitivity to minimize the impact of market interest rate swings. The analysis of the impact on net interest income over a twelve-month period is subjected to a gradual and shock 200 basis point increase or decrease in market rates on net interest income and is monitored on a quarterly basis.

 

Additional information required by Item 305 of Regulation S-K is set forth under Part I, Item 2 of this report.

 

Item 4. Controls and Procedures.

 

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act), as of the end of the period covered by this report, as required by paragraph (b) of Rules 13a-15 or 15d-15 of the Exchange Act. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective.

 

During the quarter ended September 30, 2015, there was no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

From time to time, as a normal incident of the nature and kind of business in which the Company is engaged, various claims or charges are asserted against the Company or the Bank. In the ordinary course of business, the Company and the Bank are also subject to regulatory examinations, information gathering requests, inquiries and investigations. Other than ordinary routine litigation incidental to the Company’s business, management believes based on its current knowledge and after consultation with legal counsel that there are no pending or threatened legal proceedings that will, individually or in the aggregate, have a material adverse effect on the consolidated results of operations or financial condition of the Company.

 

Item 1A. Risk Factors.

 

There have been no material changes to the risk factors disclosed in Item 1A. of Part 1 in our Annual Report on Form 10-K for the year ended December 31, 2014.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

Since the announcement of the proposed merger with Jacksonville Bancorp on October 1, 2015, the following two putative shareholder class action suits have been filed against Jacksonville Bancorp, the directors of Jacksonville Bancorp and the Company, in the Circuit Court of Duval County, Florida: (i) Paul Parshall v. Jacksonville Bancorp, Inc. et al., Case No. 16-2015-CA-006607, filed on October 16, 2015; and (ii) Patrick Donovan v. Kendall Spencer et al., Case No. 16-2015-CA-006738, filed October 22, 2015 (together, the “Florida Actions”). In the Florida Actions, plaintiffs allege that the individual director defendants breached their fiduciary duties to Jacksonville Bancorp’s shareholders in negotiating and approving the Merger Agreement through an unfair process, that the merger consideration negotiated in the Merger Agreement does not adequately value Jacksonville Bancorp, that Jacksonville Bancorp’s shareholders will not receive fair value for their common stock in the merger and that the terms of the Merger Agreement impose improper deal-protection devices that purportedly preclude competing offers. The complaints in the Florida Actions further allege that Jacksonville Bancorp and the Company aided and abetted the alleged breaches of fiduciary duty by Jacksonville Bancorp’s directors. In the Florida Actions, plaintiffs seek preliminary and permanent injunctive relief, including enjoining or rescinding the merger, an award of unspecified damages, attorneys’ fees and other relief.

 

While the Company believes that the Florida Actions are without merit and intends to vigorously defend its interest, it is not possible to predict with certainty the outcome of the proceedings or their impact on the Company.

 

Item 6. Exhibits.

 

The exhibits required to be furnished with this report are listed on the exhibit index attached hereto.

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: November 9, 2015 AMERIS BANCORP
   
  /s/ Dennis J. Zember Jr.
  Dennis J. Zember Jr., Executive Vice President and
  Chief Financial Officer (duly authorized signatory
  and principal accounting and financial officer)

 

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EXHIBIT INDEX

 

Exhibit
No.
  Description
2.1   Agreement and Plan of Merger dated as of September 30, 2015 by and between Ameris Bancorp and Jacksonville Bancorp, Inc. (incorporated by reference to Exhibit 2.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on October 1, 2015).
     
3.1   Articles of Incorporation of Ameris Bancorp, as amended (incorporated by reference to Exhibit 2.1 to Ameris Bancorp’s Regulation A Offering Statement on Form 1-A filed with the Commission on August 14, 1987).
     
3.2   Amendment to Amended Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1.1 to Ameris Bancorp’s Form 10-K filed with the Commission on March 28, 1996).
     
3.3   Amendment to Amended Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 4.3 to Ameris Bancorp’s Registration Statement on Form S-4 filed with the Commission on July 17, 1996).
     
3.4   Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.5 to Ameris Bancorp’s Annual Report on Form 10-K filed with the Commission on March 25, 1998).
     
3.5   Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.7 to Ameris Bancorp’s Annual Report on Form 10-K filed with the Commission on March 26, 1999).
     
3.6   Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.9 to Ameris Bancorp’s Annual Report on Form 10-K filed with the Commission on March 31, 2003).
     
3.7   Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on December 1, 2005).
     
3.8   Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on November 21, 2008).
     
3.9   Articles of Amendment to the Articles of Incorporation of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on June 1, 2011).
     
3.10   Amended and Restated Bylaws of Ameris Bancorp (incorporated by reference to Exhibit 3.1 to Ameris Bancorp’s Current Report on Form 8-K filed with the Commission on March 14, 2005).
     
31.1   Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Executive Officer.
     
31.2   Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Financial Officer.
     
32.1   Section 1350 Certification by the Company’s Chief Executive Officer.
     
32.2   Section 1350 Certification by the Company’s Chief Financial Officer.
     
101   The following financial statements from Ameris Bancorp’s Form 10-Q for the quarter ended September 30, 2015, formatted as interactive data files in XBRL (eXtensible Business Reporting Language):  (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Earnings and Comprehensive Income; (iii) Consolidated Statements of Changes in Stockholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements.

 

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